\  PRIMER  OF  POLITICAL  ECONOMY 


UC-NRLF 


LIBRARY 

OF  THE 

UNIVERSITY  OF  CALIFORNIA. 

Class 


A   PRIMER   OF 
POLITICAL    ECONOMY 


A    PRIMER 


OF 


POLITICAL    ECONOMY 


AN  EXPLANATION  OF  FAMILIAR  ECONOMIC 
PHENOMENA,  LEADING  TO  AN  UNDER- 
STANDING OF  THEIR  LAWS  AND 
RELATIONSHIPS 


BY 

S.    T.    WOOD 


Nefo  fforfe 
THE   MACMILLAN   COMPANY 

LONDON :  MACMILLAN  AND  CO.,  LTD. 
1901 

All  rights  reserved 

>* 

OF  THE  ^k 

\ 


COPYRIGHT,  1901, 
BY  THE  MACMILLAN  COMPANY. 


Nortoooti  ^rrss 

J.  B.  Cu»hing  &  Co.  -  Berwick  &  Smith 
Norwood  Mass.  U.S.A. 


PREFACE 

THE  most  noteworthy  feature  of  organized 
society  to-day  is  the  tendency  toward  govern- 
mental interference  in  every  kind  of  productive 
effort.  Almost  every  useful  act,  from  the  sell- 
ing of  a  cup  of  tea  to  the  building  of  a  steam- 
ship, is  supervised,  taxed,  or  helped  by  some 
municipal,  provincial,  state,  or  national  author- 
ity. The  civil  authorities  tax,  license,  or  inter- 
fere with  butchers,  cabmen,  restaurant  keepers, 
theatre  managers,  pedlers,  manufacturers,  sec- 
ond-hand dealers,  and  proprietors  of  great  mer- 
cantile establishments.  The  taking  of  wealth 
from  the  forests,  the  mines,  and  the  fisheries 
is  also  under  legislative  control,  and  is  helped 
and  obstructed  in  many  ways.  The  national 
authority  or  government  shows  the  same  con- 


vi  Preface 

fused  variety  of  plans  in  dealing  with  trade  and 
industry.  Purchases  of  material  are  discour- 
aged for  one  use  and  aided  for  another ;  some 
lines  of  industry  and  trade  are  helped,  others 
obstructed,  and  others  so  burdened  as  to  be 
made  unprofitable. 

In  all  this  there  is  a  marked  absence  of 
method  or  principle.  With  the  growth  of 
popular  government  the  duty  of  guiding  this 
complicated  policy  of  interference  falls  ulti- 
mately on  the  electors.  This  fact  emphasizes 
the  need  of  giving  greater  thought  to  a  line  of 
study  too  much  neglected.  The  wisdom  or 
folly  of  these  varied  courses  of  action  must 
be  decided  by  the  voters  at  the  polls,  and  they 
must  select  the  truth  from  a  bewildering  maze 
of  argument  and  controversy,  wise,  foolish,  and 
sometimes  personally  interested,  as  varied  as 
the  undertakings  of  constituted  authority.  The 
duty  of  citizenship  imposes  the  necessity  of 
understanding  the  principles  involved  in  the 


Preface  vii 

complicated  processes  of  commerce  by  which 
we  live,  and  with  which  our  elected  representa- 
tives are  constantly  interfering.  Education  is 
assumed  as  a  public  duty,  that  the  people  may 
protect  themselves  from  bad  or  incompetent 
citizenship,  and  for  that  desirable  end,  which 
justifies  education  at  public  expense,  no  study 
or  investigation  is  more  valuable  than  that  of 
the  laws  of  economics,  —  the  science  which 
teaches  how  we  use,  for  man's  benefit,  the  re- 
sources of  nature  and  the  discoveries  of  all 
other  sciences. 

The  object  of  this  book  is  to  afford  a  ground- 
work for  economic  study,  to  explain  some  of 
the  actual  economic  phenomena  passing  through 
our  hands  from  day  to  day,  that  their  laws, 
principles,  and  relationships  may  be  more  in- 
telligently studied  and  more  clearly  understood. 
Everything  has  been  brought  within  the  com- 
prehension of  pupils  in  the  fourth  forms  of  the 
public  schools.  This  has  necessitated  conden- 


viii  Preface 

sation  rather  than  elementary  departures,  for 
it  is  the  simplicity  and  not  the  complexity  of 
economic  principles  that  makes  them  so  elusive, 
even  to  mature  intellects.  The  reader,  and 
especially  the  student,  is  asked  to  remember 
that  this  book  is  virtually  a  condensation,  and 
to  extend  in  thought  that  which  is  but  touched 
upon  or  briefly  outlined. 


CONTENTS 

CHAPTER  PAGE 

I.  THE  HERDSMAN  OF  THE  PLAINS  i 

II.  HOW  OIL  IS  OBTAINED 8 

III.  IN  THE  HEART  OF  A  MOUNTAIN      ...  15 

IV-  MAKING  BLEACHING  POWDER   ....  22 

V.  GATHERING  INDIA  RUBBER        ....  28 

VI.  IN  A  SHOE  FACTORY 33 

VII.  THE  LAW  OF  SUPPLY  AND  DEMAND        .       .  42 

VIII.  TAXATION 51 

IX.  JOHN  MUST  PAY  FOR  THE  BOOTS       ...  64 

X.  COINS  AND  CURRENCY 72 

XI.  NATIONAL  BANKS,  GOLD  AND  SILVER       .       .  83 

XII.  BRITISH  CURRENCY 95 

XIII.  PAYING  ALL  THE  WORKERS      .        .        .        .102 

XIV.  THE  CAPITALIST 109 

XV.  INTEREST  —  JOINT  STOCK  COMPANIES  —  TRUSTS  1 16 

XVI.  GOVERNMENTAL  INTERFERENCE         .       .        .127 

XVII.  SCHEMES  FOR  BETTERMENT       .       .       •       .  134 


INTRODUCTION 

SITTING  at  breakfast  in  the  morning,  a  man 
seldom  reflects  that  for  his  personal  satisfaction 
the  good  and  useful  fruits  of  the  earth  and 
products  of  labor  have  been  gathered  from 
every  quarter  of  the  globe.  Beside  his  plate, 
which  has  been  made  in  Staffordshire,  is  a 
spoon  from  the  Oneida  Community  works  in 
New  York  State  and  a  knife  and  fork  from 
Sheffield,  with  handles  of  wood  from  Africa 
or  horn  from  South  America.  He  sits  on  a 
chair  made  of  wood  from  Northern  Canada, 
varnished  with  the  resin  of  a  tree  in  Burmah 
or  Japan,  dissolved  in  turpentine  from  the  sea- 
pines  of  the  Landes  Department  of  France  or 
the  swamp-pines  of  Alabama.  The  seat  is  of 
cane  from  the  Malay  peninsula.  His  table- 

xi 


xii  Introduction 

cloth  and  napkin  are  from  Belfast.  He  has 
tea  from  China  or  Japan,  coffee  from  Java  or 
Brazil,  bread  from  wheat  grown  in  the  Canadian 
Northwest,  leavened  with  yeast  from  Germany. 
He  has  canned  salmon  from  British  Columbia 
or  canned  rabbit  from  Australia,  sealed  in  tin 
from  Wales.  His  breakfast  is  cooked  with  coal 
from  Pennsylvania,  on  a  stove  made  of  Indiana 
iron,  and  surmounted  with  pipes  of  sheet  iron 
from  the  penal  colony  of  Siberia.  His  salt  is 
from  Goderich,  his  pepper  from  Ceylon  or 
South  America,  and  his  sauce  from  Worcester- 
shire. He  has  butter  from  a  neighboring  farm, 
perhaps  colored  with  annotto  from  Cayenne. 
His  buns  are  made  more  palatable  by  a  few  cur- 
rants from  Greece. 

The  commerce  which  enables  a  man  to  obtain 
for  his  own  use  the  products  of  all  parts  of  the 
world  must  be  complicated  and  wonderful.  He 
may  be  a  carpenter  or  bricklayer,  a  physician, 
a  lawyer,  or  a  teacher,  he  may  work  in  a  great 


Introduction  xiii 

factory  feeding  material  to  a  machine  which 
does  but  one  of  many  operations  necessary  to 
the  making  of  some  article  in  common  use. 
Yet  for  this  single  useful  service,  useful  only 
as  a  help  to  many  others,  he  is  able  to  secure 
the  many  and  varied  products  of  the  world's 
industries. 

When  it  is  remembered  that  the  production 
of  any  one  of  the  things  gathered  at  the  break- 
fast table  requires  the  aid  of  many  hands,  trained 
in  various  lines  of  industry,  and  working  in  dif- 
ferent climes  and  continents,  the  truly  complex 
nature  of  the  world's  commerce  becomes  appar- 
ent. Through  this  intricate  commerce  we  live 
by  satisfying  each  other's  wants.  By  following 
one  line  of  industry  and  becoming  specially 
proficient,  each  is  able  to  secure  a  share  of  the 
products  of  all  the  others.  To  accomplish  that 
end  in  a  community  in  which  each  is  careful 
of  his  own  property  and  jealous  lest  others  may 
obtain  that  which  is  his,  is  the  aim  of  our  trade 
and  industry. 


xiv  Introduction 

Every  useful  service  rendered  for  reward, 
whether  the  building  of  a  wall,  the  cooking  of 
a  meal,  the  making  of  a  shoe,  the  teaching  of  a 
lesson  in  school,  the  navigation  of  a  ship,  or 
the  digging  of  ore  in  the  mine,  is  a  part  of  this 
complicated  mechanism,  having  a  relation  to 
all  the  other  parts.  Here  is  something  mar- 
velous with  which  we  are  surrounded,  which  we 
must  touch  at  every  turn,  which  has  an  influ- 
ence in  settling  all  the  practical  questions  of 
daily  life,  and  which  we  should  study  and  seek 
to  comprehend.  The  easiest  road  to  an  under- 
standing of  our  complicated  industrial  and  com- 
mercial mechanism  may  be  found  in  the  analysis 
of  a  single  transaction,  and  for  that  purpose  let 
us  select  the  purchase  of  a  pair  of  boots  in  a 
city  store. 


A   PRIMER   OF 
POLITICAL    ECONOMY 


OF  THE 

UNIVERSITY 

OF 

.IFOF 


A   PRIMER   OF    POLITICAL 
ECONOMY 

CHAPTER   I 

THE    HERDSMAN    OF   THE    PLAINS 

JOHN  DOE,  a  farmer,  comes  to  the  city  to 
buy  a  pair  of  boots.  He  could  not  make  them, 
nor  could  he  learn  in  a  lifetime  the  various 
processes  by  which  they  have  been  produced 
from  the  manifold  products  of  nature.  He 
lives  by  satisfying  other  people's  wants,  and 
has  just  sold  a  load  of  wheat  at  a  gigantic 
elevator,  where  it  was  whisked  about  with 
belts,  buckets,  and  revolving  screws,  to  be  de- 
posited in  a  great  bin  with  more  of  the  same 
kind  from  farms  in  all  parts  of  the  country. 
For  the  wheat  he  received  several  bank  notes, 


2  A  Primer  of  Political  Economy 

some  new  and  crisp,  others  worn  by  use,  but 
each  bearing  an  elegantly  written  promise  that 
a  well-known  bank  would  pay  bearer  on  de- 
mand five  dollars.  John  gives  no  thought  to 
this  promise,  so  familiar  is  he  with  its  common 
results,  and  he  looks  at  the  notes  only  to  make 
sure  that  each  has  a  big  figure  "5"  in  the 
corner.  He  has  parted  with  a  load  of  good 
wheat,  and  has  nothing  but  a  few  pieces  of 
stamped  paper  in  his  pocket.  But  each  paper 
is  a  promise  that  a  solvent  bank  will  give  him 
a  stated  quantity  of  gold  on  demand.  The 
merchant  hands  out  a  pair  of  boots,  accepts 
one  of  the  bank  notes  in  payment,  and  gives 
back  in  change,  either  a  big  silver  coin  called 
a  dollar,  a  silver  certificate  stating  that  a  dollar 
is  payable  to  bearer  on  demand,  or  a  treasury 
note  promising  one  dollar  in  "  coin."  To  make 
the  change  even  John  also  receives  a  silver  coin 
marked  "quarter  dollar."  The  transaction  is 
so  common  that  it  seems  scarcely  worth  de- 


The  Herdsman  of  the  Plains  3 

scribing,  but  a  glance  at  some  of  the  essential 
preparatory  work  shows  it  to  be  one  of  the 
most  complicated  and  even  mysterious  events 
of  human  experience. 

Let  us  go  back  two  years.  The  leather, 
now  so  black  and  shining  that  John  Doe  re- 
gards it  with  pride,  was  then  the  hide  of  a 
cow  running  freely  in  a  herd  on  the  plains  of 
Argentina.  A  young  Gaucho  is  snatching  a 
few  minutes'  sleep  on  the  ground,  the  moon- 
light on  his  upturned  face,  and  his  horse,  with 
high  and  heavy  leather  trappings,  tethered 
close  by.  A  small  cloud  passes  swiftly  across 
the  moon,  and  in  the  momentary  darkness  a 
perceptible  shudder  runs  through  the  herd  of 
cattle,  appearing  as  a  black  mass  on  the  close 
horizon  of  the  night.  Another  cloud  bigger 
and  blacker  passes  over,  and  in  the  longer 
interval  of  eclipse  the  cattle  grow  more  ner- 
vous and  restless.  Soon  the  clouds  seem  to 
settle  down  from  all  parts  of  the  sky,  and  a 


4  A  Primer  of  Political  Economy 

dull  shuffling  sound  tells  that  the  herd  is  mov- 
ing. The  horse  paws  the  ground  uneasily,  and 
the  young  Gaucho  awakes.  A  glance  at  the 
dark,  lowering  sky  reveals  the  whole  situation, 
and  he  mounts  nimbly  into  the  saddle,  urging 
his  horse  toward  the  restless  herd.  His  fa- 
miliar voice  and  form  have  a  quieting  effect, 
and  he  turns  the  leaders  that  have  already 
started  toward  the  invisible  blackness  of  the 
open  prairie.  The  clouds  lower,  and  as  the  cold 
dampness  of  the  air  threatens  a  storm,  the 
cattle  grow  still  more  timid  and  uneasy.  A 
movement  in  another  direction  is  turned  back 
by  another  gallop  around  the  herd,  and  as  the 
leaders  turn  among  the  slower  cattle,  there  is 
a  momentary  quietness.  But  as  the  young 
Gaucho  gallops  round  and  round  in  the  dark- 
ness, the  storm  approaches,  and  he  sees 
that  the  cattle  are  growing  more  and  more 
alarmed. 

The  next  break-away  is  turned  with  the  great- 


The  Herdsman  of  the  Plains  5 

est  difficulty,  and  the  herdsman  realizes  that 
the  camp  must  be  aroused.  Galloping  off  to 
his  sleeping  companions,  he  gives  the  familiar, 
alarming  yell,  returning  at  full  speed  to  the  herd, 
which  seems  now  moving  restlessly  like  a  great 
black  monster,  eager  to  exhaust  its  strength  in  a 
blind  rush  over  the  limitless  plain.  The  sleep- 
ing Gauchos  awaken  with  thought  of  marauding 
and  murderous  Indians  from  the  distant  hills, 
tempted  to  pillage  by  the  presence  of  the  herd. 
But  the  black  sky  and  the  first  drops  of  the 
coming  shower  are  recognized  as  warnings  of 
a  stampede.  They  rally  to  work,  not  to  fight, 
and  as  they  reach  the  herd  they  find  the  rest- 
less animals  eager  to  break  away  in  terror  of 
the  storm. 

Four  fresh  riders,  turning  back  the  more 
eager  animals,  keep  the  herd  in  better  order 
for  a  time,  but  with  the  first  clap  of  thunder 
there  is  a  wild  stampede,  and  the  great  mass 
of  animal  life  gallops  over  the  black  prairie 


6  A  Primer  of  Political  Economy 

as  if  moved  by  a  single  impulse.  A  flash  of 
lightning  shows  their  heaving  black  forms  and 
lowered  heads,  and  the  five  Gauchos  galloping 
sullenly  beside  them.  The  thunder  follows 
quickly,  and  seems  to  shake  big  drops  of  rain 
from  the  clouds  overhead.  The  cattle  are  in 
full  stampede,  and  through  the  flashes  of  light- 
ning that  rend  the  dome  of  blackness,  the 
cannonading  of  the  thunder  and  the  drenching 
downpour,  the  herdsmen  press  forward  beside 
them.  Experience  has  long  ago  taught  them 
the  impossibility  of  stopping  the  mad  rush  of 
terrified  cattle,  but  by  riding  dangerously  close 
beside  the  leaders  they  can  turn  the  herd  before 
it  reaches  the  river.  As  the  strength  of  the 
animals  begins  to  wane,  they  are  turned  more 
and  more  to  the  right  by  the  daring  riders, 
who  press  the  leaders  closer  and  closer,  and 
before  the  darkness  of  the  storm  gives  place 
to  the  coming  day  the  herd  is  rounded  up, 
panting  and  exhausted,  while  the  wet  and 


The  Herdsman  of  tJte  Plains  7 

weary    Gauchos    are    sleeping    on    the    damp 
tuft-grass  of  the  plain. 

And  what  has  this  to  do  with  the  purchase 
of  a  pair  of  boots  ?  At  the  killing  round-up 
these  animals  are  inspected,  and  all  of  suitable 
age  and  condition  selected  for  slaughter.  Of 
the  hides  some  are  shipped  to  Britain,  tanned, 
curried,  and  returned  across  the  ocean  to  the 
shoe-factories  of  Canada  and  the  United  States. 
Thus  the  Gauchos  of  the  plains  of  Argentina 
galloping  after  the  stampeded  cattle  help  to 
make  the  pair  of  boots  selected  and  bought 
by  John  Doe. 


CHAPTER   II 

HOW   OIL    IS   OBTAINED 

AWAY  in  the  north  Atlantic  Ocean  all  hands 
on  a  sailing  vessel  are  eagerly  hurrying  to 
lower  the  small  boats.  They  have  been  called 
up  before  daylight,  the  watch  who  have  just 
been  relieved  as  well  as  the  others  who  have 
been  sleeping,  and  the  threatenings  and  abuse 
of  the  officers  make  every  one  work  with  eager 
energy.  The  lookout  in  the  crow's-nest  has 
sighted  a  shoal  of  whales,  and  his  drawling, 
singing  "blow"  has  aroused  the  whole  ship  to 
activity.  He  sees  the  bushy  clouds  of  foam 
rising  from  the  water,  and  announces  a  small 
"  pod "  of  cows  with  two  or  three  bulls  to  the 
north  of  them.  Four  boats  are  lowered  with 
a  run  from  the  creaking  pulleys,  and  the  crews 
8 


How  Oil  is  Obtained  9 

slide  down  the  ropes,  every  man  to  his  place. 
Each  boat  hoists  a  sail  as  soon  as  it  is  clear 
of  the  ship,  and  the  mate  leads  in  the  direction 
pointed  out  from  the  crow's-nest. 

The  harpooner  stands  in  the  bow,  with  a 
harpoon  gun  pointing  forward,  and  pivoted  so 
as  to  be  guided  easily  in  any  direction.  To 
the  barbed  missile  in  the  gun  is  attached  a 
manila  rope  about  eighteen  hundred  feet  long, 
which  is  carefully  coiled  into  tanks  so  that  it 
will  pay  out  when  a  harpooned  whale  dives. 
There  are  also  several  lances  —  keen-pointed 
and  edged  spears  about  eight  feet  long  —  for 
killing  the  whales  which  have  become  ex- 
hausted in  struggling  under  the  torture  of  the 
attached  harpoons.  The  boats  separate,  and  are 
gliding  along  like  small  yachts  in  a  contest  of 
speed,  when  all  round  up  at  once  into  the 
wind  and  lie  rocking  on  the  swells.  The  look- 
out in  the  crow's-nest  has  signalled  that  the 
whales  have  gone  down,  and  it  is  known  that 


io          A  Primer  of  Political  Economy 

the  passing  of  a  small  boat  over  them  would 
give  the  alarm  and  ruin  the  chance  of  killing 
them,  or  even  seeing  them  again  that  day. 

Soon  the  rising  of  the  cloudlike  jets  of  foam 
from  the  sea  tells  where  the  great  monsters 
have  risen  to  the  surface.  The  boats  are  put 
about  with  but  little  noise,  even  the  mate  giving 
orders  and  uttering  threats  under  his  breath. 
A  bull  whale  is  lying  near  like  a  smooth,  black 
island  of  flesh,  and  the  mate's  boat  rounds 
from  behind  out  of  his  range  of  vision.  As 
the  port  bow  bumps  against  the  monster's  side, 
the  harpooner  fires  his  barbed  spear  into  the 
yielding  flesh.  The  great  mass  suddenly  be- 
comes animated,  and  the  boat's  crew  make 
desperate  efforts  to  get  out  of  danger.  The 
whale  rolls  from  side  to  side,  writhing  in  con- 
vulsions, raising  his  gigantic  tail  into  the  air 
and  lashing  the  water  into  foam  with  deafening 
blows.  Suddenly  he  goes  down,  almost  cap- 
sizing the  small  boat  with  the  swell  of  his 


How  Oil  is  Obtained  n 

descent.  The  line  flies  around  the  loggerhead 
until  the  first  tank  is  empty  and  a  large  part 
of  the  second  coil  is  out.  Every  effort  of  the 
harpooner  to  tighten  the  turns  pulls  the  boat's 
head  down  and  threatens  to  swamp  her.  The 
slacking  of  the  line  comes  suddenly,  and  the 
crew  begin  to  haul  in,  stowing  the  manila  rope 
in  a  large  coil  aft.  The  mate  stands  with  lance 
in  hand  and  watches  the  water  closely  as  the 
line  comes  in.  When  the  great  black  mass 
rises  above  the  surface,  it  is  apparently  as  life- 
less as  it  seemed  when  the  boat  stole  silently 
upon  it.  The  lance  thrown  by  the  mate  sinks 
into  the  oily  flesh  up  to  the  handle,  as  a  knife 
sinks  into  soft  butter,  and  again  there  is  a 
lashing  of  the  water  and  a  dive,  but  more  feeble 
than  before.  Again  the  whale  comes  to  the 
surface,  and  after  two  more  lances  have  been 
buried  in  his  yielding  flesh  the  signal  is  given 
to  the  ship  that  a  catch  has  been  made. 
The  other  boats  have  been  less  fortunate. 


12          A  Primer  of  Political  Economy 

One  was  smashed  by  a  blow  from  a  har- 
pooned bull,  and  the  crew  were  rescued  after 
sitting  up  to  their  necks  in  water  for  half  an 
hour,  supported  by  the  splintered  planks,  ribs, 
and  thwarts.  Another  had  to  cut  a  line  en- 
tangled on  the  loggerhead,  to  avoid  being 
swamped,  and  the  fourth  failed  to  fix  a  har- 
poon, although  near  enough  on  two  occasions 
to  risk  a  shot. 

A  scaffolding  of  planks  is  rigged  out  from 
the  ship's  side,  about  five  feet  above  the 
water,  and  the  carcass  of  the  whale  is 
brought  alongside  below  it  and  fastened  by 
chain  slings.  The  gigantic  head  is  partly  cut 
from  the  body  with  great  spade-like  knives 
about  twelve  feet  long,  which  sink  into  the 
soft  blubber  of  the  whale  almost  with  their 
own  weight.  After  the  under  jaw  is  de- 
tached and  hoisted  aboard  with  groaning, 
creaking  tackle,  the  body  is  attacked  by  men 
on  the  platform.  Deep  diagonal  cuts  are 


How  Oil  is  Obtained  13 

made  through  its  coating  of  fat,  which  is  torn 
off  by  tackle  in  "blankets"  about  five  feet 
wide  and  a  foot  thick,  and  hoisted  on  deck. 
Others  are  working  vigorously  in  an  endeavor 
to  sever  the  head,  and  the  chains  and  pulleys 
are  operated  from  the  deck  to  help  them. 
When  at  last  the  neck  is  cut  through,  the 
head  is  towed  astern,  and  the  tearing  of 
blankets  of  flesh  from  the  body  continues. 
After  the  carcass  is  stripped,  it  is  cast  loose 
to  feed  the  gulls  and  other  scavengers  of  the 
sea,  and  the  strongest  tackle  is  made  ready 
to  hoist  the  head  aboard.  The  great  mass  is 
as  big  and  as  heavy  as  three  full-grown  ele- 
phants, yet  the  straining  ropes  and  chains 
slowly  raise  it  from  the  water  and  swing  it 
on  deck.  A  mass  of  fat  is  cut  from  the 
snout,  and  an  opening  is  made  into  a  cistern 
of  pure  spermaceti  in  the  head,  as  clear  as 
water.  This  is  bailed  into  tanks,  and  the  rest 
of  the  mass  is  hauled  to  the  lee  rail,  waiting 


14          A  Primer  of  Political  Economy 

till  a  roll  of  the  ship  takes  it  overboard. 
The  blubber  is  cut  in  strips  and  fed  into  the 
try-works,  great  boilers  for  melting  it  into  oil, 
and  the  men  who  stand  by  to  feed  it  bail  out 
the  oil  into  barrels.  The  refuse  that  will  not 
melt  is  the  only  fuel  used,  and  the  works  are 
so  constructed  that  there  is  no  possibility  of 
the  fire  reaching  the  oil.  The  work  goes  on 
for  four  days,  and  when  the  decks  are 
scrubbed  to  their  accustomed  whiteness,  and 
the  casks  stowed  and  lashed  below,  it  is 
found  that  the  whale  has  yielded  forty  barrels 
of  oil. 

These  bullying  and  working  officers  and 
silently  working  men  have  been  helping  to 
make  the  pair  of  boots  that  John  Doe 
bought.  The  oil  they  melted  out  was  used  in 
currying  the  soft  upper  leather,  and  their 
whale  chase  was  a  part  of  the  process  of 
shoemaking. 


CHAPTER   III 

IN   THE   HEART   OF   A    MOUNTAIN 

AN  adventurous  climber  on  a  lofty  peak  in 

i 

the  Selkirks  hears,  when  pausing  to  rest,  a 
rapid,  jarring  pulsation  in  the  heart  of  the 
mountain,  like  the  ticking  of  a  giant  watch. 
The  snow  lying  everywhere  about  is  soft  with 
the  slow  warmth  of  early  summer,  but  it  does 
not  seem  to  melt  or  grow  less.  Down  in  the 
valleys  the  rocks  are  bare,  and  the  few  patches 
of  soil  watered  by  the  mountain  streams  are 
green.  The  pulsations  continue  and  invite  an 
investigation.  Away  down  the  side  toward 
the  valley  is  a  heap  of  broken  rock,  looking 
in  the  deep  distance  like  a  new  excrescence 
on  the  ancient  face  of  the  mountain.  On  a 
nearer  approach  it  is  seen  to  be  a  large 
15 


1 6          A  Primer  of  Political  Economy 

irregular  pile  of  broken  stones  scattered 
loosely  down  the  slope.  It  is  like  a  door-sill 
to  a  cavernous  hole  in  the  rock,  from  which 
a  hand-car  is  pushed  by  a  man  in  overalls 
and  smock.  The  contents  of  the  car  are 
dumped  over  the  face  of  this  pile,  to  which  it 
makes  an  imperceptible  addition. 

Let  us  light  our  wax  candles  and  follow 
the  miner  who  has  pushed  his  empty  hand- 
car back  into  the  tunnel.  We  must  stoop 
under  the  low  roof,  from  which  the  water  is 
constantly  dripping,  and  follow  the  narrow 
rails  as  they  curve  along  the  damp  tunnel. 
At  one  point  a  candle  is  burning  in  a  steel 
ring,  hooked  on  a  small  ledge  of  rock.  Just 
under  it  is  a  black  hole,  and  the  light  warns 
us  of  an  open  winze,  one  hundred  feet  deep, 
to  a  lower  level  of  this  extensive  mine. 
Every  sound  seems  to  have  many  echoes 
coming  from  the  solid  rock  overhead  and  all 
about.  The  light  of  another  candle  shows 


In  the  Heart  of  a  Mountain  17 

two  men  drilling  into  the  rock.  One  is  hold- 
ing and  turning  a  drill,  while  the  other 
strikes  it  with  a  sledge  hammer,  and  we 
wonder  at  the  long  swinging  blows  he  can 
strike,  in  a  place  where  there  is  scarcely 
room  to  turn  about.  Farther  along  the  main 
tunnel  the  miner  is  reloading  his  hand-car 
with  the  rock  or  ore  that  comes  from  an 
opening  between  some  timbers  standing  from 
the  floor  to  the  roof.  A  few  feet  away  is 
the  skip,  a  small  elevator  for  hoisting  ore, 
but  big  enough  for  two  to  stand  in  if  cling- 
ing closely  to  the  rope.  Up  it  goes  with 
speed  to  the  higher  level,  and  here  the  secret 
of  the  mountain's  pulsation  is  revealed.  Three 
compressor  drills  are  in  operation,  and  each 
is  shooting  out  a  drill  and  boring  into  the 
rock  at  a  speed  that  makes  the  sledge  of  the 
worker  on  the  lower  level  seem  tiresome  in 
its  sloth.  Each  drill  pounds  into  the  rock  so 
quickly  that  a  continuous  stream  of  dust  runs 


1 8          A  Primer  of  Political  Economy 

from  it.  The  power  from  this  machinery  is 
generated  by  a  great  steam  engine  down  in 
the  gulch,  where  air  is  forced  into  a  large 
cylinder  at  high  pressure.  From  this  a  pipe 
is  laid  up  the  face  of  the  mountain  and 
along  the  tunnel  to  the  chief  parts  of  the 
mine.  This  pipe  is  connected  to  the  cylinder 
of  the  compressor  drill,  and  the  force  of  com- 
pressed air  drives  the  drills  into  the  rock 
with  rapid  blows.  The  air  thus  brought  in 
also  serves  for  ventilation,  and  makes  life 
endurable  in  the  narrow  confines  of  the  tun- 
nels, shafts,  and  drifts.  The  skip  rises  to 
where  other  compressor  drills  are  boring 
holes  into  the  narrow  roof. 

The  ore  is  in  a  vein  from  three  to  six 
feet  wide,  cutting  through  a  part  of  the 
mountain.  The  tunnels  are  run  along  this 
vein,  and  during  every  shift  or  working  period 
a  part  of  the  roof  of  each  is  honeycombed 
by  the  drillers.  The  holes  are  charged  with 


In  the  Heart  of  a  Mountain  19 

dynamite,  and  after  the  miners  leave  for  their 
rest,  the  charges  are  exploded  by  an  electric 
current.  The  ore  thus  detached  is  gathered 
up  by  the  next  shift,  lifted  by  the  skip  or 
shovelled  into  the  chutes  as  convenient,  loaded 
on  the  small  hand-cars,  and  pushed  out  on 
the  dump.  It  is  raw-hided  down  the  face  of 
the  mountain,  that  is,  tied  in  soft  cowhide 
bags,  and  hauled  by  sure-footed  mules  to  the 
station  of  a  narrow-gauge  railway,  where  it 
starts  on  its  trip  to  the  smelter.  There  it  is 
piled  in  a  heap  on  a  layer  of  kindling  wood, 
which  serves  to  ignite  it.  After  burning  with 
a  sulphurous  flame,  and  giving  off  stifling 
fumes  for  two  or  three  weeks,  it  cools  off 
and  is  charged  into  the  smelting  furnace, 
mixed  in  layers  with  coke.  This  is  ignited, 
and  the  heat  is  intensified  by  blasts  of  air 
till  it  pours  out  in  a  red  molten  stream.  It 
falls  into  another  furnace,  where  the  fire  still 
keeps  it  in  a  liquid  mass.  The  metal  sinks 


2O          A  Primer  of  Political  Economy 

to  the  bottom,  while  the  melted  rock  and 
other  waste  flow  off  from  the  top  and  are 
carried  away  in  fine  black  crystals  by  a 
stream  of  water.  From  an  opening  in  this 
furnace  the  metal,  at  blinding  heat,  crawls 
out  into  hollows  in  the  ground,  where  it  is 
allowed  to  cool.  It  is  then  called  matte. 
There  are  several  other  furnaces,  some  burn- 
ing coal,  others  coke  or  wood,  through  which 
it  must  pass  before  it  is  cast  into  conven- 
iently sized  plates  of  yellow  metal  These 
plates  are  the  anodes,  which  are  shipped 
away  to  the  Atlantic  seaboard,  where  a  sup- 
ply of  ingredients  from  other  mines  in  other 
parts  of  the  world  facilitates  the  refining 
processes.  There  the  gold,  silver,  and  copper 
are  finally  separated.  The  copper  goes  to  a 
brass  foundry,  where  it  is  mixed  with  zinc 
from  Cartagena  in  Spain,  and  made  into  brass. 
From  this  brass  were  made  the  long  nails 
which  appear  as  regular  rows  around  the 


/;/  the  Heart  of  a  Mountain  21 

heels  of  the  boots  purchased  by  John  Doe 
after  selling  his  wheat.  The  miners  in  the 
heart  of  the  mountain  were  unconsciously 
helping  to  make  boots. 


CHAPTER   IV 

MAKING   BLEACHING   POWDER 

WITHIN  high  walls  and  surrounded  by  build- 
ings, sheds,  and  tall  chimneys  in  a  Lanca- 
shire town,  half  a  dozen  strange-looking  men 
are  shovelling  a  whitish  powder  from  heaps 
on  the  paved  ground  into  large  barrels. 
These  men  have  flannel  cloths  wound  many 
times  over  their  mouths  and  noses,  and  above 
these  muzzles,  which  make  their  heads  appear 
distorted,  are  goggles  which  hide  and  pro- 
tect their  eyes.  Their  feet  and  legs  are 
also  wrapped  in  flannels,  and  they  are  so 
clothed  as  to  look  like  moving  bundles  of 
rags.  One  of  them  shouts,  "  Roger  is  com- 
ing," and  all  drop  their  shovels  and  run 
helter-skelter,  while  behind  them  a  strange 


Making  Bleaching  Poivdcr  23 

green  fog  or  mist  is  carried  along  by  the 
wind.  When  this  fog  disappears,  they  return, 
laughing  and  joking,  to  their  work,  as  if 
there  was  no  danger  or  discomfort  in  it. 
The  green  fog  is  deadly  gas  of  chlorine, 
which,  pumped  on  slaked  lime,  changes  it 
into  bleaching  powder,  and  while  the  packers 
are  certain  to  contract  asthma  and  other  dis- 
eases, they  are  also  liable  at  any  time  to  be 
caught  by  the  deadly  gas  which  they  nick- 
name "  Roger."  To  breathe  it  is  almost  inva- 
riably fatal,  and  the  victim  is  carried  to  his 
home,  where  he  dies  in  a  few  hours.  In  spite 
of  the  protection  of  flannel  and  goggles  the 
gas  and  powder  cause  many  distressing  ail- 
ments, and  shorten  the  lives  of  the  workers. 
The  shovellers  must  leave  their  work  every 
few  minutes  to  get  a  breath  of  fresh  air. 

In  another  part  of  the  works  are  men 
laboring  before  great  furnaces.  Each  has  a 
large  bunch  of  oakum  in  his  mouth  to  keep 


24          A  Primer  of  Political  Economy 

him  from  inhaling  the  poisonous  gas  escaping 
from  the  salt  cakes,  which  he  is  turning  and 
drawing  from  the  glaring,  heated  aperture. 
With  two  towels  he  manages  to  wipe  the  per- 
spiration from  his  face,  one  towel  being  in 
use  while  the  other  is  drying,  and  there  he 
works  in  the  heat  for  eight  hours  with 
scarcely  a  minute  to  snatch  a  bite  of  food. 
The  work  of  the  salt-cake  men  consists  in 
baking  common  salt  and  treating  it  with  vitriol 
to  make  muriatic  acid,  such  as  tinsmiths  use 
in  soldering.  They  can  be  recognized  any- 
where by  the  effect  of  the  poisonous  gases 
they  are  compelled  to  breathe,  which  not  only 
destroy  the  lungs,  but  attack  the  teeth,  causing 
them  to  decay  rapidly  and  fall  out.  A  salt- 
cake  man  has  no  teeth,  or  perhaps  a  few 
blackened  stumps  remain,  and  as  he  is  unable 
to  chew  his  food,  indigestion  as  well  as  diseased 
lungs  adds  to  his  afflictions.  The  effect  of 
this  work  is  noticeable  in  less  than  a  year. 


Making  Bleaching  Powder  25 

In  another  building  are  men  shovelling  slaked 
lime,  turning  it  over  and  over  until  it  is  finally 
loaded  into  the  lifts  that  convey  it  to  a  chamber 
where  it  is  treated  with  chlorine.  The  white 
particles  of  lime  are  in  the  air  all  about  them, 
and  here  again  each  has  a  big  bunch  of  oakum 
in  his  mouth  to  prevent  him  inhaling  the  irri- 
tating and  burning  dust.  At  this  they  can  work 
only  twenty  minutes  at  a  time,  with  a  short 
interval  of  rest,  for  a  shift  of  seven  hours. 
After  the  day's  work  they  wash  themselves 
with  oil  or  tallow,  for  the  application  of  water 
to  their  faces  or  hands,  with  every  pore  filled 
with  lime,  would  cause  terrible,  if  not  fatal 
burning.  At  this  work  there  is  a  tendency 
to  many  diseases  always  associated  with  the 
handling  of  lime,  and  blindness  from  the 
alkaline  burning  is  not  uncommon. 

On  each  side  of  a  long  corridor  are  small 
sheds  which  seem  like  infirmaries  for  the 
victims  of  the  deadly  gases  and  the  corrosive 


26          A  Primer  of  Political  Economy 

acids  and  dusts  of  the  works.  In  these  sheds 
are  the  half-blind  victims  of  lime-shovelling, 
the  asthmatic  and  decrepit  packers,  the  tooth- 
less salt-cake  men  and  the  used-up  vat  men, 
barrow  men,  and  general  workers.  There  they 
sit  day  after  day,  breaking  the  stones  from 
which  sulphur  is  to  be  extracted,  and  the  click 
of  their  hammers  has  won  for  them  the  jocular 
name  of  the  hand-bell  ringers.  This  is  the 
last  occupation  about  the  works,  and  as  the 
men  weaken  at  it,  they  are  removed  to  the  work- 
house, their  places  being  filled  by  others  unfit 
for  the  more  arduous  occupations.  These  men 
are  not  old,  for  the  work  is  such  that  they 
seldom  or  never  live  to  an  advanced  age. 
Every  branch  of  the  work  is  dangerous  and 
destructive.  They  are  obliged  to  clothe  them- 
selves in  woollens,  as  the  gases  would  destroy 
cotton  or  linen  in  a  few  days. 

But   in   enduring  these  hardships  the  work- 
men  have   been   helping  to   make  the  pair  of 


O^  THE  X 

Y    ) 
- 


vr 

% 

Making  Bleaching  Powder  27 

boots  which  John  Doe  purchased.  The  bleach- 
ing powder  was  used  to  whiten  the  linen  lining, 
and  the  muriatic  acid  was  used  in  combination 
with  other  chemical  agents  in  separating  the 
copper  used  in  making  the  eyelets,  hooks, 
and  nails. 


CHAPTER  V 

GATHERING    INDIA    RUBBER 

IN  a  dense  jungle  by  the  Amazon  River  a 
half-naked  Brazilian  native  is  chopping  his 
way  through  the  close  luxuriant  foliage.  He 
swings  his  great  knife  with  vigor  and  energy, 
chopping  off  the  stems  and  stalks  that  impede 
his  progress,  and  gradually  forcing  his  way 
in  the  twilight  of  the  perpetual  shade.  The 
rank  vegetation  under  his  feet  makes  a  cover- 
ing for  the  wet  soil,  and  he  looks  strangely 
diminutive  under  the  giant  palms,  ferns,  and 
other  growths  of  the  moist  tropical  climate. 
A  large  gourd  is  slung  over  his  shoulder,  and 
with  every  move  there  is  a  clicking  and  rat- 
tling within  it.  The  sound  seems  a  break  in 
the  utter  loneliness  of  his  slow  march.  He 
28 


Gathering  India  Rubber  29 

finds  a  large,  robust  tree,  and  proceeds  with 
easy  deliberation  to  chop  off  the  outside  bark. 
With  his  small  axe  he  smooths  a  part  of  the 
surface  and  makes  a  deep  cut  into  the  inner 
bark,  from  which  a  creamy  milk  begins  to 
exude.  A  small  earthenware  cup  is  hung  below 
the  cut,  and  before  he  leaves,  the  tree  has  half 
a  dozen  suspended  around  it,  each  catching  a 
slowly  oozing  thread  of  milk.  He  cuts  his 
way  through  the  foliage  to  another  tree  and 
repeats  the  operation,  leaving  another  circle 
of  cups  catching  the  liquid.  When  some  twenty 
trees  have  been  tapped,  he  returns  to  the  hut 
which  he  has  built  of  the  great  leafy  vegeta- 
tion all  about  him,  and  eats  his  lonely  meal. 
In  the  evening  he  starts  out  to  gather  the  cups 
and  empty  them  into  the  gourd,  when  he  finds 
he  has  about  a  gallon  of  the  milk  as  a  result 
of  his  first  day's  work. 

Next  morning  he  starts  out  again,  and  cuts 
another  series  of   gashes  in  each  tree,  a    little 


3O          A  Primer  of  Political  Economy 

lower  than  the  first.  The  cups  are  again  hung 
to  catch  the  milk,  and  in  the  evening  it  is 
gathered  into  the  gourd.  Three  or  four  days 
are  thus  spent  in  collecting,  and  when  the 
gourd  is  nearly  full,  the  work  of  drying  com- 
mences. For  this  purpose  a  smoking  fire  is 
built  in  the  hut,  the  fuel  being  the  nuts  of  some 
adjacent  palm  trees.  A  clay  funnel  is  placed 
over  the  fire  so  as  to  exclude  all  draft  and 
produce  a  steady  smoke,  and  the  native  com- 
mences operations  by  dipping  a  large  wooden 
paddle  into  the  gourd,  and  waving  it  in  the 
ascending  smoke.  The  clinging  milk  rapidly 
coagulates,  and  the  paddle  is  again  dipped 
into  the  gourd  and  held  in  the  smoke.  With 
each  new  coating  of  milk  the  quantity  of  rubber 
clinging  to  the  paddle  increases,  and  the  native 
works  away,  blinking  in  the  ascending  column 
of  smoke.  When  a  large  cake  of  rubber  has 
accumulated  on  the  paddle,  a  cut  is  made  along 
one  of  the  edges  and  the  mass  is  peeled  off. 


Gathering  India  Rubber  31 

The  process  is  repeated  till  all  the  milk  in  the 
gourd  has  been  transformed  into  black  moulds 
of  rubber,  and  the  native  starts  out  to  tap  the 
trees  for  a  new  supply. 

When  he  has  accumulated  as  many  moulds 
of  rubber  as  he  can  carry,  he  tramps  back  to 
the  house  of  the  merchant  and  landowner  who 
has  supplied  him  with  the  utensils  of  his  work. 
The  moulds  of  rubber  are  weighed  and  credited 
to  his  account  by  the  merchant,  who  is  at  once 
his  landlord,  employer,  and  selling  agent,  and 
he  starts  back  into  the  jungle  with  a  fresh 
supply  of  food  and  other  necessaries.  The 
merchant  also  supplies  his  wife  and  family  with 
such  things  as  they  require,  and  the  account 
goes  on  unsettled  from  year  to  year. 

This  man  struggling  through  the  dense 
jungle,  often  suffering  from  the  fevers  that 
lurk  in  the  swampy  exhalations,  is  also  helping 
to  make  the  boots  purchased  by  John  Doe. 
The  rubber  which  he  collects  is  shipped  to 


32          A  Primer  of  Political  Economy 

England,  or  New  York,  and  is  subjected  to 
various  manufacturing  processes  according  to 
the  use  for  which  it  is  intended.  Some  of  it  is 
used  in  making  the  cement  or  paste  that  unites 
the  linings  and  facings  in  this  pair  of  boots. 
John  Doe  knows  nothing  of  the  work  of  the 
native,  amid  the  rank  vegetation  of  the  Ama- 
zon, and  he  in  turn  has  no  knowledge  of  John 
Doe  and  his  boots.  Yet  the  one  has  been 
working  to  furnish  the  other  with  the  article 
he  requires,  and  both  are  parts  of  the  intricate 
commercial  and  industrial  system  which  enables 
us  to  live  by  satisfying  each  other's  wants. 


CHAPTER  VI 

IN   A   SHOE    FACTORY 

AMONG  whirling,  jarring,  and  pounding  ma- 
chinery, with  the  smell  of  leather  in  the  air,  a 
score  of  men  are  busy  in  the  unchanging 
monotony  of  factory  work.  The  windows  look 
out  on  brick  walls,  crowding  closely  around, 
showing  that  it  is  in  the  heart  of  a  city.  Near 
at  hand  a  workman  places  a  side  of  heavy 
leather  on  a  long  table  and  selects  from  a  shelf 
a  great  punch  or  die,  shaped  like  the  sole  of 
a  boot.  Over  the  table  is  a  beam  steadily 
rising  and  falling  with  the  motion  of  the  ma- 
chinery. The  die  is  placed  on  the  leather,  and 
as  the  beam  descends  it  forces  it  through, 
seeming  not  to  feel  the  resistance  of  the  hard 
material.  The  workman  dexterously  shifts  the 
33 


34          A  Primer  of  Political  Economy 

die  over  the  surface  of  the  leather,  and  every 
time  the  beam  descends  a  boot-sole  is  punched 
out,  until  the  hide,  a  skeleton  hanging  by 
slender  threads,  is  thrown  to  the  floor  and 
another  is  placed  on  the  table.  The  remnants 
of  the  hide  are  passed  to  a  man  standing  before 
an  up-ended  log,  resembling  a  butcher's  block. 
He  has  a  die  the  shape  of  a  boot-heel,  and  all 
day  long  he  swings  his  heavy  mallet,  cutting 
heel  pieces  from  what  remains  of  the  heavy 
hides.  The  soles  are  carried  in  bundles  to  a 
boy  who  passes  them  through  a  noisy  little 
machine  that  pares  them  down  to  the  required 
thickness,  and  the  heel  pieces  go  to  an  energetic- 
looking  machine  that  rushes  them  into  a  mould, 
and  fastens  them  together  roughly  in  the  shape 
of  finished  heels.  The  scrappy  remnants  of 
the  hides  pass  on  to  other  workers,  who  select 
pieces  suitable  for  various  internal  parts  of 
boots  and  shoes.  These  pieces  are  passed 
through  other  machines  which  multiply  them 


In  a  Shoe  Factory  35 

by  splitting,  pare  off  their  edges  or  otherwise 
shape  them  for  their  various  uses. 

Thus  a  score  of  workers  go  on  day  after  day, 
turning  out  soles,  heels,  and  other  heavy  parts, 
in  many  forms  and  from  many  qualities  of 
leather.  Even  the  finest  scraps  and  parings  of 
leather  are  not  wasted,  for  they  go  on  to  a 
grinding  machine  where  they  are  reduced  to 
powder.  This  is  mixed  with  a  gummy  sub- 
stance and  pressed  into  forms  for  filling  between 
the  soles,  and  for  other  parts  not  exposed  to 
wear. 

On  the  floor  above,  the  scene  is  entirely 
different.  Among  the  busy  workers  there  are 
more  girls  than  men.  The  leather  used  is  light 
and  fine,  for  the  flexible  and  ornamental  parts 
of  footwear.  Some  operators  are  working  on 
canvas  and  other  cloth  fabrics.  The  workers 
sit  in  rows  before  long  benches,  dexterously 
cutting  both  leather  and  cloth  according  to 
peculiar  shaped  patterns,  so  queer  and  varied 


36          A  Primer  of  Political  Economy 

that  it  seems  hard  to  believe  they  could 
ever  be  made  to  fit  a  human  foot.  There  are 
some  buzzing  machines  that  pare  down  these 
lighter  pieces  of  leather  as  they  are  rapidly 
passed  through  by  trained  fingers.  These 
peculiar  patterns  in  leather  and  cloth  are  tied 
in  bundles  and  passed  to  the  next  floor  above, 
where  the  noise  of  running  machinery  is  much 
more  persistent.  The  great  room  is  crowded 
with  girls  seated  in  rows,  before  sewing- 
machines  which  seem  to  have  grown  into 
various  distorted  forms.  Some  of  these  ma- 
chines have  two  needles  and  sew  a  double 
seam.  One  has  a  needle  that  wobbles  back 
and  forth  and  makes  a  zigzag  stitch,  while 
another  has  a  small  knife  that  dances  up  and 
down  beside  the  needle  and  trims  the  edge  of 
the  leather.  A  noisy  machine  has  a  small 
hammer  that  pounds  down  the  edge  as  it  is 
turned  over.  These  machines  seem  to  have 
twisted  themselves  into  various  forms,  as  me- 


In  a  Shoe  Factory  37 

chanics  sometimes  curl  up  to  work  in  corners  or 
other  difficult  places. 

One  very  intelligent-looking  machine  cuts  a 
button-hole  in  the  upper  of  a  lady's  shoe, 
throws  out  the  piece,  and  runs  around  the  edge 
with  two  needles,  one  above  and  one  below, 
finishing  it  with  close  stitching  over  a  strong 
border  of  twine.  With  this  machine  a  girl  can 
cut  and  sew  five  hundred  button-holes  in  a  day. 
On  the  top  is  a  dial  which  registers  the  number 
of  stitches  it  makes,  and  the  owner  pays  the 
inventor  for  the  privilege  of  using  it  according 
to  the  record  of  work  done.  Another  machine 
sews  on  buttons,  which  are  thrown  carelessly 
into  a  hopper.  Each  plunge  of  the  big  needle 
sews  on  a  button,  and  the  needle  comes  down  as 
fast  as  the  seconds  are  ticked  off  on  a  watch. 
Eyelets  are  driven  through  and  clinched  by 
another  machine  that  selects  the  little  brass 
tubes,  turns  them  the  right  way,  and  finishes 
them  in  the  leather,  so  fast  that  the  punching 


38          A  Primer  of  Political  Economy 

makes  a  noisy  rattle.  In  this  room  the  queer- 
shaped  pieces  arriving  in  bundles  from  the 
cutting-room  are  passed  from  hand  to  hand,  and 
from  machine  to  machine,  till  they  finally 
emerge  in  the  form  of  uppers  ready  for  soling. 
These  pass  to  the  lasting-room,  where  the 
smell  of  wax  and  moist  leather  recalls  the 
old-time  shoemaker's  shop.  Here  the  soles, 
heels,  and  uppers  are  brought  together  and 
take  form  in  the  finished  boot.  The  soles  are 
passed  through  machines  that  trim  and  form 
them  for  the  various  shapes  and  sizes  required, 
and  groove  and  mitre  the  edges  for  sewing. 
The  leather  is  softened  by  water,  and  soles 
and  uppers  are  put  together  on  wooden  lasts, 
most  of  the  work  requiring  the  strong  hands 
of  men.  A  machine  with  many  long  deft 
fingers  holds  the  edge  of  the  upper  down 
over  the  sole,  while  another  machine  nails 
the  parts  in  position.  The  united  parts  are 
passed  to  other  machines  that  sew  the  soles 


In  a  Shoe  Factory  39 

and  uppers  together.  When  this  is  done 
inside  out,  a  sturdy  machine  is  used  to  turn 
them  after  the  lasts  are  withdrawn. 

There  are  machines  that  sew  the  sole  and 
upper  together,  that  carry  and  sew  on  strips 
of  leather,  that  nail  on  a  heel  with  one  stroke, 
and  that  drive  pegs  which  are  cut  from  wire 
fed  in  a  coil.  Some  machines  drive  one  and 
two  rows  of  pegs  or  nails  so  fast  that  they 
cannot  be  counted.  A  workman  stands 
before  a  sole-polishing  machine  with  a  lever 
in  each  hand,  which  he  moves  this  way  and 
that,  the  boot  and  polishing  cylinder  follow- 
ing his  motions.  In  all  parts  of  the  room 
are  frames  or  racks  loaded  with  boots  in 
various  stages  of  the  lasting  process,  and 
ready  to  be  wheeled  from  one  machine  to 
another.  The  whirling  cylinders  that  trim 
off  the  soles  and  heels  resemble  wood-work- 
ing machinery,  and  the  workmen  stand  in  a 
cloud  of  flying  powder  and  small  particles 


40          A  Primer  of  Political  Economy 

of  leather  like  the  sawdust  in  a  lumber  mill. 
These  machines  cut,  trim,  sandpaper,  polish, 
burnish,  and  perform  many  other  operations, 
each  under  the  guidance  of  a  separate  work- 
man. Each  machine  and  each  operation 
has  a  distinguishing  name,  and  so  has  each 
of  the  numerous  parts  that  go  to  make 
up  a  finished  boot.  In  the  trimming  and 
polishing  of  the  edge  of  the  sole,  a  boot 
passes  through  the  hands  of  four  workmen. 
The  heel,  after  being  nailed  on,  is  cut  into 
shape  by  whirling  knives,  ground  by  sand- 
paper on  wheels,  inked,  burnished,  polished, 
brushed,  and  subjected  to  various  finishing 
processes  before  the  revolving  shafts,  wheels, 
and  brushes.  After  the  nailing,  which  is 
done  in  strong,  irresistible  pressure,  the  heel 
receives  the  attention  of  six  workmen.  Some 
operate  on  a  heel  several  times,  with  others 
alternating,  so  that  it  is  passed  from  hand  to 
hand  fifteen  times  before  it  is  finished.  In 


In  a  Shoe  Factory  41 

each  operation  a  workman  has  so  many  boots 
passing  through  his  hands  that  he  learns  to 
move  with  great  speed  and  dexterity.  Fully 
fifty  of  these  workers  have  helped  directly 
to  make  the  boots  bought  by  John  Doe. 
Each  has  done  his  or  her  part  to  transform 
the  various  kinds  of  raw  material  into  a  shape 
serviceable  to  man,  and  the  result  of  these 
concerted  efforts  is  a  pair  of  boots,  to  John 
both  pleasing  and  serviceable. 


CHAPTER  VII 

THE   LAW   OF    SUPPLY   AND   DEMAND 

WE  have  seen  but  few  of  the  many 
workers  who  have  been  busy  in  all  parts  of 
the  world,  preparing  and  shaping  the  material 
for  John  Doe's  boots.  Scores  of  other  trades 
and  occupations  have  done  their  part  of  the 
work.  The  machinery  of  the  factories,  the 
tools  of  the  miners,  the  whaling  ship  and 
all  its  complicated  parts,  the  locomotive  en- 
gine rushing  across  the  continent,  all  have 
come  into  existence  by  the  labor  of  many 
hands  guided  by  many  minds.  Looking  back 
still  further,  we  find  each  of  these  workers 
requiring  tools  and  material  supplied  by  many 
others.  The  shoemaker  requires  leather  from 
the  currier,  who  requires  hides  from  the  tan- 
42 


The  Law  of  Supply  and  Demand        43 

ner  and  oil  from  the  refiner.  The  tanner 
obtains  raw  hides  from  the  butcher,  who  ob- 
tains his  cattle  from  the  drover,  his  knife 
from  the  cutler,  and  his  block  from  the  lum- 
berman. The  cutler  depends  on  the  iron 
founder  for  his  blades,  and  on  the  dealer  in 
horn  or  foreign  woods  for  his  handles.  The 
iron  founder  requires  coal  from  the  miner, 
and  thus  every  line  of  material  can  be  traced 
back  through  an  increasing  number  of  indus- 
tries to  the  point  where  every  worker  drew 
his  supplies  directly  from  nature's  great  store- 
house, which  economists  call  land.  The  term 
"  land "  is  used  to  mean  not  only  the  sur- 
face of  the  ground,  but  all  that  is  beneath 
or  above  it,  the  minerals  and  forests,  the 
water  and  its  wealth  of  living  creatures;  in 
short,  all  nature's  free  gifts  to  man. 

All  the  world's  wealth  is  taken  from  this 
great  storehouse  by  human  labor,  and  will  be 
returned  to  it  again  by  the  laws  of  nature. 


44          A  Primer  of  Political  Economy 

Some  wealth  returns  to  the  land  in  a  few 
days,  some  in  a  few  months,  a  few  years,  or 
a  few  centuries.  Workers  in  different  parts 
of  the  world,  knowing  nothing  of  one  another, 
were  unconsciously  cooperating  toward  the 
production  of  a  pair  of  boots  for  John  Doe, 
and  yet  they  seemed  to  produce  the  right 
quantity  of  each  line  of  material  used.  One 
would  naturally  suppose  that  there  would  be 
too  much  leather,  not  enough  cloth,  or  some 
great  error  as  to  the  amount  of  oil  required 
for  currying.  If  only  one  pair  of  boots  were 
required,  the  regulation  of  the  supply  would 
be  comparatively  easy,  but  no  one  knows  how 
many  pairs  of  boots  will  be  wanted,  nor  how 
many  other  uses  will  be  found  for  each  line 
of  material. 

This  intricate  problem  of  regulating  the 
supplies  solves  itself  without  the  intervention 
of  governmental  authority.  It  is  natural  for 
men  to  seek  the  best  rewarded  occupations, 


The  Law  of  Supply  and  Demand       45 

to  satisfy  their  desires  with  the  least  exertion. 
In  Canada  it  is  possible  to  grow  oranges 
under  glass,  but  nobody  does  so,  because  it 
requires  less  labor  to  grow  apples,  sell  them, 
and  buy  oranges  with  the  money  received. 
That  is  satisfying  the  desire  for  oranges  with 
the  least  exertion.  The  same  rule  of  conduct 
regulates  the  supply  of  all  the  material  used 
in  making  John  Doe's  boots,  and  the  supply 
of  all  other  things  required  for  human  main- 
tenance or  comfort.  The  owner  of  a  great 
copper  mine  studies  the  requirements  of  the 
world  in  that  particular  line.  He  knows  the 
output  of  all  the  important  copper-producing 
districts,  and  the  wants  of  the  leading  mar- 
kets. If  his  mine  contains  rich  ore,  he  keeps 
on  producing,  even  if  an  excessive  supply 
causes  a  fall  in  price.  But  if  he  owns  a 
mine  that  barely  pays  the  cost  and  risk  of 
working,  he  cannot  stand  a  fall  in  the  price 
of  copper.  If  there  is  more  copper  than  is 


46          A  Primer  of  Political  Economy 

required  for  the  nails  of  John  Doe's  boots 
and  other  similar  uses,  the  price  of  it  is  cer- 
tain to  fall.  The  copper  becomes  available 
for  coarser  or  cheaper  uses.  Copper  nails  are 
used  in  cheaper  work  than  formerly,  and  it 
is  the  cheapest  or  marginal  utility  that  deter- 
mines value. 

In  Australia,  when  water  is  scarce  and  can 
be  used  only  for  drinking,  it  is  valued  accord- 
ing to  that  use.  When  it  becomes  more  plen- 
tiful, and  some  can  be  used  for  washing,  it 
is  all  valued  according  to  that  more  extended 
use,  whether  required  for  washing  or  drink- 
ing. It  is  the  same  with  copper  and  all 
other  things  bought  and  sold.  If  the  mine- 
owner  who  is  making  small  profit  sees  a  pros- 
pect of  too  much  copper,  he  knows  the  cost 
of  mining  will  be  greater  than  the  price  he 
will  receive.  He  tells  his  workmen  that  they 
must  work  for  lower  wages  or  he  will  be 
obliged  to  stop  mining.  The  workmen  hear 


The  Law  of  Supply  and  Demand       47 

that  the  whalers  have  great  difficulty  in  get- 
ting crews  to  man  their  vessels,  and  are  pay- 
ing high  rates  to  all  who  will  sign  for  a 
voyage.  With  the  excess  of  copper  for  the 
nails  has  come  a  scarcity  of  oil  for  currying 
leather.  More  vessels  have  been  taken  for 
whaling,  and  there  is  a  demand  for  men.  The 
workers  in  the  mine  are  not  willing  to  accept 
lower  wages  than  are  offered  in  the  seaports, 
so  they  leave  the  mine,  and  ship  on  the 
whalers.  There  is  thus  a  reduction  in  the  sup- 
ply of  copper  and  an  increase  in  the  supply 
of  oil,  adjusting  the  quantity  of  each  to  the 
needs  of  the  people.  In  this  way  the  natural 
desire  of  man  to  adopt  the  most  remunera- 
tive employment  adjusts  the  supply  of  every 
line  of  goods  to  the  demand.  It  is  not  nec- 
essary for  all  miners  to  leave  for  the  whale 
fisheries  to  counteract  an  abundance  of  cop- 
per and  a  scarcity  of  oil.  A  few  workers 
here  and  there,  crowded  out  of  the  one  occu- 


48          A  Primer  of  Political  Economy 

pation  and  tempted  into  the  other  are  suffi- 
cient to  restore  the  balance  between  supply 
and  demand.  If  there  should  be  an  abun- 
dance of  sole  leather  and  a  scarcity  of  upper 
leather,  sole  leather  will  be  devoted  to  a 
wider  range  of  uses,  and  the  fall  in  price  will 
make  its  production  less  profitable.  The  tan- 
ner will  find  it  more  to  his  advantage  to  in- 
crease the  output  of  the  scarcer  kind  of 
leather,  and  by  thus  following  the  natural 
rule  of  human  conduct,  he  will  adjust  the 
balance  of  supply  and  demand. 

Tanners  and  other  manufacturers  do  not 
wait  for  a  change  in  prices  to  determine  which 
lines  they  will  restrict  and  which  they  will 
increase.  They  watch  the  market  closely  and 
study  the  course  of  every  change  likely  to  affect 
the  price  of  their  wares  and  their  material. 
By  attention  and  judgment  they  are  able  to 
anticipate  many  of  the  influences  that  would 
tend  toward  a  change  in  prices,  and  counteract 


The  Law  of  Supply  and  Demand        49 

them  by  varying  the  supply,  thus  preventing 
the  changes  from  taking  place.  The  Gaucho 
of  the  southern  plains  finds  no  demand  for  his 
services  as  a  herdsman,  but  an  opening  for 
renumerative  work  in  the  wheat  fields.  He 
does  not  know  the  reason,  but  following  the 
natural  impulse,  he  leaves  the  saddle  and 
takes  to  the  seed-drill  and  reaping-machine. 
The  cause  may  be  found  in  the  British  food 
market,  where  the  prospect  of  a  shortage  of 
wheat  has  induced  speculators  to  promise  to 
buy  it  at  a  high  price  on  a  future  date.  This 
has  stimulated  wheat-growing.  At  the  same 
time  the  prospect  of  an  abundance  of  beef  has 
tended  to  discourage  the  herdsmen.  The 
young  Gaucho  on  the  plains,  by  turning  from 
one  occupation  to  another,  has  unconsciously 
done  his  share  to  restore  the  balance,  to  pro- 
duce that  which  was  scarce  and  lessen  the 
supply  of  that  which  was  abundant.  This 
shows  the  working  of  the  law  of  supply  and 


5O          A  Primer  of  Political  Economy 

demand,  a  natural  law  which  enables  the  pro- 
ductive workers  in  all  parts  of  the  world  to 
contribute  toward  a  unity  of  results,  unknown 
to  one  another,  and  without  even  knowing  the 
results  toward  which  they  are  aiming.  Every 
excess  of  goods  is  checked,  and  every  shortage 
made  good,  by  the  natural  tendency  of  man  to 
seek  the  most  productive  lines  of  industry,  to 
satisfy  desires  with  the  least  possible  exertion. 


CHAPTER  VIII 

TAXATION 

WHEN  John  Doe  pays  for  the  boots,  he  is 
paying  taxes,  although,  if  he  has  never  studied 
economics,  he  may  be  entirely  ignorant  of  the 
fact.  The  merchant  is  required  to  pay  taxes 
to  the  city  treasury  to  be  expended  in  keep- 
ing a  fire-protection  service,  a  police  force, 
parks  for  recreation,  schools,  and  many  other 
things  for  public  use  or  convenience.  These 
taxes  are  levied  according  to  the  value  of  the 
store  and  the  value  of  the  stock  which  includes 
the  pair  of  boots.  The  merchant  is  obliged  to 
pay  this  out  of  the  profit  on  the  boots,  and  as 
that  is  increased  to  the  extent  of  the  tax  by  an 
increase  in  the  price,  John  Doe  is  really  paying 
a  share  of  the  merchant's  taxes.  Every  other 
51 


52          A  Primer  of  Political  Economy 

merchant  has  to  pay  a  similar  tax  to  the  city, 
so  none  could  afford  to  sell  at  a  lower  price. 
Wherever  John  Doe  may  go  to  buy  his  boots 
he  will  be  forced  by  the  price  demanded  to 
make  a  contribution  to  the  city's  treasury. 
The  city  authorities  have  other  methods  of 
levying  on  him.  The  merchant  requires  a  ser- 
vice of  city  water  in  his  store,  and  for  that  he 
is  in  some  cases  charged  more  than  it  costs. 
The  profit  goes  to  the  city  treasury,  and  is  in 
reality  a  tax  levied  on  the  merchant.  That  is 
also  shifted  on  to  John  Doe's  shoulders  by  the 
necessity  of  charging  a  still  higher  price  for 
the  boots.  The  carter  who  carries  the  boots 
from  the  freight  shed  at  the  railway  station  in 
his  ponderous  wagon  is  obliged  to  pay  a  license 
fee  to  the  city.  That  fee,  though  small,  is 
added  to  the  charge  for  carting  the  boots,  and 
all  other  things  moved  by  licensed  carters,  the 
license  being  part  of  a  scheme  for  establish- 
ing a  regular  charge  for  such  services.  It 


Taxation  53 

increases  the  cost  of  the  boots  to  the  merchant, 
and  is  finally  paid  by  John  Doe  in  the  price 
asked  by  the  clerk  behind  the  counter.  The 
company  supplying  electric  light  to  the  store 
is  obliged  to  pay  a  large  sum  to  the  city  for 
the  franchise  or  privilege  to  go  into  business. 
The  understanding  is  that  the  company  will 
recoup  itself  in  its  charges,  and  the  merchant 
who  sells  the  boots  is  compelled  to  pay  propor- 
tionately for  his  light.  That  charge,  as  a  part 
of  his  expenses,  is  added  to  the  price  of  the 
boots,  and  the  city  authorities,  by  levying  on 
the  electric  light  company,  compel  John  Doe 
to  pay  still  another  tax.  The  public  services 
for  which  these  taxes  are  levied  are  really 
rendered  to  John  Doe  in  common  with  others 
who  live  or  do  business  in  the  city. 

There  is  one  tax  levied  by  the  city  on  the 
merchant's  premises,  which  does  not  increase 
the  price  of  the  boots,  and  that  is  the  tax  on 
the  land  on  which  the  store  stands.  It  may 


54          A  Primer  of  Political  Economy 

seem  peculiar  that  while  a  tax  on  boots, 
houses,  electric  lights,  and  all  products  of 
labor  makes  them  dearer,  a  tax  on  land 
makes  it  cheaper.  Richard  Roe,  who  owns 
the  land  on  which  the  store  stands,  is  charg- 
ing the  merchant  a  regular  rent  for  the  privi- 
lege of  maintaining  the  store  there.  The 
amount  he  can  charge  depends  entirely  on 
the  location  and  its  surroundings,  as  these 
affect  the  chances  of  doing  business.  In  a 
small  village  the  amount  would  be  proportion- 
ately small,  and  to  avoid  the  bother  of  paying, 
the  merchant  would  probably  buy  the  loca- 
tion. If  the  village  grew  to  a  town,  the 
owner  of  a  lot  on  the  business  street  would 
find  himself  able  to  secure  a  much  larger 
revenue  from  a  merchant  or  manufacturer 
wanting  to  build  a  store  or  factory  on  it. 
And  if  the  town  should  grow  to  a  city,  the 
same  owner,  though  he  might  have  lived  in 
a  distant  country,  would  find  himself  wealthy. 


Taxation  55 

He  could  secure  a  large  income  by  merely 
allowing  some  merchant  to  build  or  maintain 
a  store  on  his  lot.  In  Toronto  there  are 
small  patches  of  land  for  which  the  owners 
obtain  as  high  as  $100  a  foot  frontage 
every  year,  and  in  New  York  and  London 
the  land  rents  are  far  higher.  Land  has 
sold  in  Toronto  at  the  rate  of  $1,250,000 
per  acre,  in  New  York  at  $15,000,000  per 
acre,  and  in  London  sales  have  been  effected 
at  $20,000,000  per  acre.  The  city  levies  a 
tax  on  land,  but  that  does  not  enable  the 
owner  to  charge  any  more  for  it.  A  tax  on 
boots  enables  the  owners  to  increase  their 
prices,  not  merely  because  they  want  to  do 
so,  but  because  the  tax  makes  boots  more 
difficult  to  obtain.  It  increases  the  cost  of 
producing  boots,  makes  them  scarce,  lessens 
the  supply,  restricts  their  use,  and  in  conse- 
quence makes  them  dearer.  A  tax  on  land 
cannot  lessen  the  supply,  because  that  is  fixed 


56          A  Primer  of  Political  Economy 

by  nature,  but  it  increases  the  available  sup- 
ply by  making  the  holders  of  vacant  land 
more  anxious  to  offer  it  for  sale.  However 
eager  a  landowner  may  be  to  increase  his 
rent  when  the  city  increases  his  taxes,  he  can- 
not do  so,  as  the  taxes  cause  other  owners  to 
offer  land  on  more  reasonable  terms.  Rich- 
ard Roe  is  getting,  say,  $2000  a  year  ground 
rent  from  the  merchant  who  owns  the  store 
where  John  Doe  bought  the  boots.  The  city 
might  take  one-half,  three-quarters,  or  even 
the  whole  of  this  amount  in  taxation  every 
year,  and  Richard  would  not  be  able  to 
charge  the  merchant  any  more,  neither  would 
the  merchant  be  able  to  charge  any  more  for 
his  boots.  The  rental  of  the  ground  is  gen- 
erally fixed  for  a  term  of  years,  but  even 
when  bargaining  for  a  renewal  of  the  lease 
the  tax  would  not  enable  Richard  Roe  to  ob- 
tain an  advance.  The  rent  he  can  charge 
depends  on  the  value  of  the  site  for  business 


Taxation  57 

purposes,  and  no  matter  how  much  of  it  the 
city  takes,  he  cannot  obtain  any  more.  If  he 
were  getting  $2000  a  year,  he  would  probably 
sell  his  lot,  if  so  disposed,  for  $40,000.  The 
value  of  land  is  always  estimated  from  the 
income  present  and  prospective,  and,  at  5  per 
cent  per  annum,  a  lot  yielding  $2000  a  year 
would  be  worth  $40,000.  If  the  city  took 
half  the  income  in  taxation,  leaving  him  only 
$1000  a  year,  he  would  be  willing  to  sell  his 
lot  for  $20,000.  If  three-quarters  of  the 
income  were  taken  by  the  city,  leaving  him 
only  $500,  he  would  be  willing  to  sell  out  for 
$10,000;  and  if  the  city  took  the  whole 
income,  the  lot  would  have  no  selling  value. 
That  is  another  explanation  of  the  way  in 
which  the  taxation  of  land  makes  it  cheaper. 
The  land  tax  must  remain  a  matter  be- 
tween Richard  Roe  and  the  city,  and  cannot 
affect  the  price  of  John  Doe's  boots.  If  the 
land  on  which  the  store  stands  belongs  to  the 


58          A  Primer  of  Political  Economy 

merchant  himself,  whom  we  will  call  Henry 
Foe,  the  same  principles  operate.  Henry  Foe 
obtains  the  full  advantage  of  his  good  location, 
but  instead  of  handing  the  value  of  it  over 
every  year  to  Richard  Roe,  keeps  it  himself. 
The  city  may  take  this  rental  value,  or  any 
part  of  it,  from  him  in  taxation,  and  he  will 
be  no  more  able  to  advance  his  prices  than 
if  he  paid  it  to  Richard  Roe,  or  retained  it 
himself.  The  only  effect  of  the  tax  is  to 
alter  the  destination  of  his  money. 

John  Doe  has  borne  many  city  taxations 
although  he  is  not  a  resident  of  the  city,  and 
he  has  to  pay  the  taxes  levied  by  his  own 
township,  and  spent  in  making  roads,  build- 
ing bridges,  maintaining  schools,  and  support- 
ing the  township  and  county  councils.  But 
in  the  mutual  relations  between  the  city  and 
the  country,  these  apparent  injustices  in  taxa- 
tion are  adjusted.  If  John  Doe  must  buy 
boots  subject  to  city  taxation,  the  people  of 


Taxation  59 

the  city  must  buy  produce  from  the  country. 
The  tax  on  the  boots,  like  every  other  addi- 
tion to  the  cost  of  a  farmer's  purchases,  has 
a  tendency  to  increase  the  price  of  farm  prod- 
uce sold  in  the  city.  The  competition  in 
every  line  of  industry  thus  tends  to  confine 
the  burden  of  every  tax  to  the  district  over 
which  it  is  levied.  Although  it  cannot  be 
asserted  as  an  absolute  rule,  it  is  generally 
true  that  the  people  of  each  municipality, 
each  province,  state,  or  nation,  must  bear  their 
own  taxation,  however  ingenious  may  be  their 
efforts  to  shift  it  onto  outsiders. 

But  we  have  not  yet  reached  the  end  of 
John  Doe's  taxation  bill  in  regard  to  the 
boots.  He  must  pay  to  the  state  for  the 
maintenance  of  the  civil  courts,  the  care  of 
the  blind,  the  deaf-mutes,  and  the  insane,  as 
well  as  for  the  general  administration  of  state 
or  provincial  affairs.  The  merchant  is  not 
willing  to  take  the  risk  of  a  fire  destroying 


60          A  Primer  of  Political  Economy 

his  stock,  so  he  has  it  insured,  the  premium 
charged  by  the  company  being  estimated  as  a 
part  of  his  expenses.  It  must  be  met  from 
the  profits  obtained  on  his  sales,  and  is  in 
consequence  one  of  the  items  that  go  to 
make  up  the  price  of  the  boots  bought  by 
John  Doe.  The  state  imposes  a  tax  on  the 
insurance  company,  and  in  that  way  John 
Doe  pays  a  part  of  it,  which  reaches  the  pro- 
vincial or  state  treasury  through  the  mer- 
chant and  insurance  company.  In  the  course 
of  business  the  merchant  requires  an  occa- 
sional advance  of  money  from  the  bank,  and 
the  charge  for  such  accommodation  is  also  re- 
garded as  a  part  of  his  running  expenses.  It 
is  enhanced  by  the  state  tax  on  banks,  which 
is  in  the  same  way  paid  by  John  Doe  in 
common  with  the  merchant's  other  customers. 
National  taxes  are  numerous.  The  canvas 
used  for  lining  the  boots  is  taxed  by  a  cus- 
toms officer  when  brought  into  the  country, 


Taxation  61 

and  its  price  to  the  manufacturer  is  propor- 
tionately increased.  This  increase,  with  an 
added  profit  on  it,  is  paid  by  the  merchant, 
and  finally,  with  another  profit,  by  John  Doe. 
The  nails  in  the  boots  are  taxed  the  same 
way,  the  tax  being  finally  shifted  to  John 
Doe.  The  thread  with  which  the  boots  are 
sewn  and  the  wax  used  on  the  thread  are 
also  taxed  in  the  same  way  by  the  national 
authorities,  and  John  Doe  is  made  to  contrib- 
ute the  combined  amount.  The  leather  has 
been  subjected  to  import  taxation  and  its 
price  consequently  increased,  the  amount  of 
the  increase  also  appearing  in  the  final  price 
of  the  boots.  The  India  rubber,  the  many 
component  parts,  as  well  as  the  machinery 
used  in  the  various  processes  of  manufacture, 
are,  with  few  exceptions,  subjected  to  taxa- 
tion, which  is  finally  contributed  with  added 
profits  by  John  Doe. 

The  finished  boots  have  not  been  subjected 


62          A  Primer  of  Political  Economy 

to  import  taxation,  for  they  have  been  manu- 
factured in  the  country.  Federal  taxation  is 
levied  on  such  things  when  they  enter  from 
other  countries.  But  the  manufacturer  is  en- 
abled to  recoup  himself,  for  the  accumulated 
load  of  taxation  which  he  has  paid,  by  the 
tariff,  which  prevents  John  Doe  or  any  mer- 
chant with  whom  he  deals  from  importing 
boots  from  other  countries.  The  tariff  imposes 
a  tax  on  imported  boots  of  about  one-third 
their  value,  so  it  pays  John  Doe  better  to  buy 
the  products  of  local  manufacture,  and  pay 
not  only  the  accumulated  taxations  on  the  ma- 
terial, but  an  additional  amount  which  the 
manufacturer  is  enabled  to  obtain.  The  tax  on 
imported  boots  enables  the  manufacturer  of 
boots  to  advance  his  prices  to  the  level  of  the 
cost  of  foreign-made  boots  with  the  duty  added. 
That  enhances  the  price  John  Doe  and  all 
other  boot-buyers  must  pay,  and  the  system  is 
continued  to  encourage  the  local  manufacture 


Taxation  63 

of  boots.  Those  who  favor  it  think  that  the 
advantage  of  having  boot  and  shoe  factories  in 
active  operation  within  the  taxation  area  more 
than  compensates  for  the  extra  price  paid. 
Opponents  of  the  system  contend  that  the  loss 
must  always  be  greater  than  the  gain,  and  that 
with  freedom  to  buy  in  the  cheapest  markets, 
the  most  profitable  industries  only  would  be 
established  —  their  products  being  exported  to 
pay  for  other  things  required.  People  can 
obtain  boots  by  manufacturing  them,  or  by 
making  or  producing  some  other  article  to  give 
in  exchange  for  them.  When  free  from  legal 
obstructions  they  will  adopt  the  method  which 
gives  the  boots  required  with  the  least  expendi- 
ture of  labor. 


OF  THE 

(    UNIVERSITY 

OF 


CHAPTER  IX 

JOHN  MUST  PAY  FOR  THE  BOOTS 

WE  have  now  reached  the  most  difficult  part 
of  this  complicated  transaction.  We  have  seen 
how  people  in  every  quarter  of  the  globe, 
unknown  to  one  another,  did  their  part  in  the 
many  processes  necessary  to  the  making  of  a 
pair  of  boots  for  John  Doe.  It  is  now  neces- 
sary that  John  should  pay  each  and  every  one 
of  them  for  the  services  they  have  rendered 
him.  His  own  contribution  to  the  wealth  of 
the  world  is  made  by  growing  wheat,  but  it 
would  be  impossible  for  him  to  send  his  wheat 
all  over  the  world  to  pay  every  one  who  has 
helped  to  make  the  boots.  And  even  if  it 
were  possible,  many  of  them  would  not  want 
the  wheat,  and  would  not  be  willing  to  give 
64 


John  must  pay  for  the  Boots  65 

anything  or  render  any  service  for  it.  But 
John  must  pay  every  one  of  them,  and  pay 
them  by  growing,  reaping,  and  threshing  wheat. 
He  must  pay  the  Brazilian  who  cut  his  way 
through  the  jungle  by  the  Amazon,  the  Gaucho 
who  galloped  through  the  night  after  the  stam- 
peded herd,  the  men  who  suffered  the  torture 
of  the  alkali  works,  the  miners  who  drilled 
deep  shafts  in  the  mineral-laden  mountains,  and 
the  smelters  who  sweltered  in  the  glare  of  the 
furnaces,  the  whale  fishers,  tanners,  curriers, 
and  busy  workers  in  the  factory,  even  to  the 
clerk  who  parcelled  up  the  boots  and  handed 
them  over  the  counter.  Under  primitive  con- 
ditions every  man  made  the  things  he  required 
from  the  material  supplied  by  nature.  Every 
process  was  necessarily  slow  and  laborious,  and 
continuous  work  supplied  only  a  few  necessi- 
ties. But  men  found  that  greater  results  could 
be  accomplished  by  confining  their  efforts  to 
the  making  of  special  classes  of  goods  and  ex- 


66          A  Primer  of  Political  Economy 

changing  to  secure  the  variety  of  things  needed 
in  daily  life.  With  the  Esquimaux  and  unciv- 
ilized Indians  each  is  his  own  shoemaker, 
weaver,  boat-builder,  tool-maker,  tailor,  hunter, 
and  fisher.  In  a  more  advanced  stage  we  find 
a  weaver,  a  tailor,  and  a  shoemaker  located  in 
a  farming  district.  These  men  do  not  plant 
wheat  and  vegetables,  but  devote  all  their  time 
to  their  special  trades,  thus  acquiring  a  skill 
and  deftness  that  greatly  increase  the  product 
of  their  labor.  The  farmers  and  gardeners  also 
confine  their  attention  to  their  own  lines  of 
work.  They  give  grain  and  vegetables  to  the 
weaver,  and  in  return  he  spins  their  yarn  into 
cloth.  They  give  food  products  to  the  shoe- 
maker, and  in  return  he  gives  them  shoes,  also 
to  the  tailor  who  makes  their  webs  of  cloth 
into  clothing.  By  each  producing  one  kind  of 
goods  and  exchanging  with  the  others,  all  ob- 
tain vastly  more  than  under  primitive  condi- 
tions in  which  each  did  everything  for  himself. 


John  must  pay  for  the  Boots  67 

The  farmer,  weaver,  tailor,  and  shoemaker 
illustrate  a  rudimentary  separation  of  trades. 
The  principle  can  be  followed  till  there  are 
an  infinite  number  of  distinct  occupations,  till 
one  man  no  longer  makes  a  boot  but  only  puts 
on  a  heel  or  smooths  off  a  sole,  till  the  weaver 
no  longer  operates  his  loom  but  attends  to 
some  piece  of  machinery  in  a  great  factory,  till 
the  farmer  no  longer  cards  and  spins  wool 
into  yarn  but  turns  the  fleece  over  to  the  fac- 
tory, where  it  passes  through  many  hands, 
each  trained  to  dexterity  in  one  operation,  be- 
fore it  becomes  yarn  for  weaving. 

In  the  separating  of  trades  and  the  exchang- 
ing of  products  a  difficulty  soon  develops. 
Suppose  a  tailor  wants  a  pair  of  shoes.  He 
applies  to  the  shoemaker,  who  may  not  want 
clothes.  If  the  shoemaker  wants  wheat,  the 
tailor  cannot  get  the  shoes  he  wants  unless  he 
can  find  a  farmer  wanting  clothes  and  willing 
to  give  wheat  for  them.  The  tailor  can  then 


68          A  Primer  of  Political  Economy 

exchange  clothes  for  wheat,  take  the  wheat  to 
the  shoemaker,  and  obtain  the  boots  he  wants. 
In  city  newspapers  we  often  see  advertisements 
for  barter.  Some  one  will  want  to  trade  a 
bicycle  for  a  sail-boat,  or  a  shot-gun  for  a  sew- 
ing-machine. It  is  always  rare  and  difficult 
to  find  anyone  having  the  thing  desired  and 
wanting  to  exchange  it  for  the  thing  to  be 
parted  with.  This  difficulty  is  overcome  by 
trading  in  some  article  universally  desired. 
The  tailor  wanting  shoes  does  not  seek  ^ 
shoemaker  wanting  clothes.  He  trades  the 
clothes  for  some  article  that  every  one  wants, 
and  takes  it  to  the  shoemaker,  the  gardener, 
the  boat-builder,  the  gun-maker,  and  every  one 
else  who  produces  anything  he  wants.  The 
shoemaker  trades  his  shoes,  not  for  the  par- 
ticular things  he  wants,  but  for  something 
every  one  wants.  With  this  article,  in  univer- 
sal demand,  he  can  secure  all  the  purchasable 
things  he  requires.  The  farmer,  too,  trades 


John  must  pay  for  the  Boots  69 

his  wheat  for  something  in  universal  demand, 
and  for  that  he  obtains  the  shoes,  clothing, 
and  furniture,  the  houses,  pictures,  books,  and 
other  things  needed  for  his  maintenance  or 
comfort.  The  man  who  wishes  to  trade  a 
shot-gun  for  a  sewing-machine  will  generally 
find  it  to  his  advantage  to  trade  his  shot-gun 
for  some  article  in  general  demand,  which  he 
can  trade  at  any  time  for  a  sewing-machine. 
The  unity  of  thought  or  impulse  that  leads 
people  to  fix  their  desires  on  some  few  articles 
makes  such  trading  possible.  These  articles 
are  generally  personal  adornments. 

With  the  Indians  of  the  Great  Lake  regions 
it  was  wampum,  a  ringlike  bead  made  from  a 
shell  found  on  the  Gulf  of  Mexico.  These 
shells  were  carried  to  the  northern  country, 
cut  into  strips  by  slow  labor  with  primitive 
appliances,  then  cut  into  squares,  drilled,  and 
rounded.  Such  beads  were  highly  prized  as 
personal  adornments,  and  the  Indian  who  had 


70          A  Primer  of  Political  Economy 

a  belt  covered  with  them  was  indeed  dis- 
tinguished. Indians  would  trade  any  article 
of  value  they  did  not  need,  for  wampum,  and 
with  that  they  could  buy  whatever  their  tribes- 
men had  to  sell.  With  more  civilized  tribes 
and  races  gold  and  silver  were  used  for  the 
same  purpose,  and  the  general  desire  for  these 
metals  makes  them  available  for  a  similar 
commercial  use  at  the  present  day.  When  a 
tailor  wants  shoes  he  does  not  search  for  a 
shoemaker  wanting  clothes,  but  he  trades  the 
clothes  he  makes,  with  any  one  who  will  give 
gold  or  silver  for  them,  knowing  that  any 
shoemaker  will  be  glad  to  give  him  shoes 
for  the  precious  metals.  The  farmer,  too, 
trades  his  wheat  for  gold  and  silver,  and  for 
these  metals  he  obtains  the  clothing,  tools, 
books,  pictures,  and  furniture,  the  building 
material,  the  services  of  carpenters,  harvesters, 
and  laborers,  everything  available  that  he  de- 
sires. All  other  producers  trade  in  the  same 


John  must  pay  for  the  Boots  71 

way,  giving  their  products  for  gold  and  silver, 
and  then  giving  those  metals  in  return  for  the 
things  desired. 

Using  the  precious  metals  in  that  way,  men 
soon  saw  the  inconvenience  of  weighing  them 
and  testing  their  purity.  To  obviate  those 
difficulties,  the  precious  metals  were  stamped 
or  coined  into  pieces  of  a  uniform  weight  and 
a  uniform  degree  of  purity.  Governments,  in 
coining  gold  or  silver,  testify  to  the  weight 
and  purity  of  each  piece,  thus  saving  people 
the  trouble  of  weighing  and  analyzing  for 
themselves.  In  remote  mining  regions  the 
gold  still  circulates  occasionally  in  a  rough 
state,  each  merchant  weighing  for  himself, 
but  coining  or  the  use  of  coins  is  universal 
with  civilized  countries.  Other  metals  are 
always  mixed  with  gold  and  silver  to  harden 
the  coins  and  prevent  loss  by  wear,  but  the 
exact  proportion  of  such  cheaper  metal  is  always 
known. 


CHAPTER  X 

COINS   AND   CURRENCY 

WHEN  John  Doe  paid  for  the  boots  he  did 
not  give  coin  but  a  five-dollar  note  issued  to 
the  First  National  Bank  of  New  York  by  the 
National  Government.  On  the  note  it  was  set 
forth :  "  The  First  National  Bank  of  New 
York  will  pay  the  bearer  on  demand  Five 
Dollars."  That  promise  was  further  guaranteed 
as  follows :  "  This  note  is  secured  by  bonds 
of  the  United  States,  deposited  with  the  United 
States  Treasury  at  Washington."  John  received 
in  change  a  silver  certificate  bearing  the  inscrip- 
tion :  "  This  certifies  that  there  has  been 
deposited  in  the  Treasury  of  the  United  States 
One  Silver  Dollar,"  and  also :  "  One  Silver 
Dollar  payable  to  bearer  on  demand."  He  also 
received  a  silver  coin  stamped:  "Quarter 
Dollar."  Instead  of  the  silver  certificate  he 
72 


Coins  and  Currency  73 

might  have  received  a  treasury  note  of  the 
United  States  payable  in  coin,  which  might 
mean  gold  or  silver ;  or  a  greenback,  so  called 
on  account  of  the  color  of  the  design  on  the 
back  of  the  first  notes  issued  after  the  outbreak 
of  the  war.  The  dollar  of  his  change  might  have 
been  paid  in  a  big  silver  coin  of  that  designation. 

All  this  seems  very  complicated  and  in  no 
way  connected  with  the  exchange  of  goods  for 
gold  weighed  on  delicate  scales,  or  even  with  the 
exchange  of  goods  for  coined  gold,  but  the  same 
principle  underlies  the  use  of  money  in  any  form. 
The  simplest  use  of  money  is  the  trading  of 
goods  for  wampum  or  gold  dust.  From  that  the 
progress  is  easy  and  natural  to  a  system  under 
which  the  precious  metals  are  made  into  coins  of 
uniform  recognized  weights.  The  next  step  is 
to  a  paper  currency  based  on  one  of  the  precious 
metals,  a  system  in  use  in  Canada,  and  as  it  is 
extremely  simple  it  should  be  investigated  first. 

In  Canada  John  Doe  would  have  traded  his 


74          ^  Primer  of  Political  Economy 

wheat  for  a  number  of  crisp  notes,  each  setting 
forth  that  the  Canadian  Bank  of  Commerce 
would  pay  to  bearer  on  demand  five  dollars. 
One  of  these  he  would  have  given  to  the  mer- 
chant for  the  boots,  and  he  would  have  received 
in  change  a  note  bearing  the  inscription :  "  The 
Dominion  of  Canada  will  pay  the  bearer  on 
demand  One  Dollar.'*  The  silver  coin  received 
would  bear  no  promise  of  payment,  the  inscrip- 
tion merely  designating  it  as  twenty-five  cents. 
It  may  be  well  to  begin  an  inquiry  into  this  pecu- 
liar exchange  of  printed  promises,  by  explaining 
what  is  meant  by  the  term  "dollar."  It  was 
originally  the  popular  name  for  a  large  silver 
coin,  but  in  this  connection  it  is  a  standard  of 
weight  used  by  the  Government  in  weighing 
gold  for  coinage,  as  the  carat  is  used  by 
jewellers  in  weighing  diamonds,  the  ton  by 
merchants  in  weighing  coal,  and  the  drachm 
by  chemists  in  weighing  drugs.  It  is  equal  to 
23.22  grains,  so  that  when  the  Bank  of  Com- 


Coins  and  Currency  75 

merce  agrees  to  pay  the  bearer  on  demand  five 
dollars  it  agrees  in  reality  to  pay  him  116.1 
grains  of  gold.  When  the  Dominion  of  Canada, 
in  reality  the  Government  representing  the 
people  of  the  Dominion,  agrees  to  pay  one 
dollar,  it  agrees  to  pay  23.22  grains  of  gold. 
If  John  Doe  had  wanted  to  get  the  gold  in 
place  of  the  boots,  he  would  have  taken  the 
five-dollar  note  to  the  bank  and  obtained  an 
American  five-dollar  coin  called  a  half  eagle. 
This  would  contain  116.1  grains  of  the  precious 
metal.  The  notes  are  issued  of  the  same 
denominations  as  the  coins,  to  make  payments 
easy.  With  the  gold  coin  in  five-dollar  and  ten- 
dollar  pieces  it  would  be  impossible  to  pay  a 
note  for  four  and  three-quarter  dollars,  or  any 
other  fractional  amount.  The  bank  would  be 
under  no  obligation  to  pay  gold,  notwithstand- 
ing the  direct  promise  printed  on  its  note.  The 
Canadian  law  makes  the  notes  issued  by  the 
Dominion  Government,  one  of  which  John  Doe 


76          A  Primer  of  Political  Economy 

receives  in  change,  a  legal  tender,  that  is  a 
legal  substitute  for  gold.  If  John  Doe  went  to 
the  Bank  of  Commerce  to  get  the  gold  accord- 
ing to  the  promise  on  the  note,  the  clerk  could 
legally  refuse  to  give  it  to  him,  and  could 
redeem  the  note  or  discharge  the  obligation  by 
giving  him  five  one-dollar  notes.  John  would 
be  obliged  by  law  to  accept  these  in  payment  of 
his  demand,  but  he  could  take  them  to  the 
office  of  the  Deputy  Receiver  General,  a  gov- 
ernment official,  and  obtain  in  the  form  of  a 
coin  the  gold  promised  on  the  face  of  them. 
The  law  making  these  Dominion  notes  a  legal 
tender  compels  all  creditors  to  accept  them  in 
payment  of  debts,  but  it  is  because  the  Deputy 
Receiver  General  is  ready  at  all  times  to 
redeem  them  in  gold  that  people  are  willing  to 
receive  them  in  payment  for  goods.  No  man 
would  give  his  wheat,  his  boots,  or  his  clothing 
for  these  printed  promises,  were  it  not  that  the 
Government  stands  ready  to  redeem  them  in 


Coins  and  Currency  77 

gold.     This  is  made  clear  by  a   study  of   the 
nature  of  paper  currency. 

When  John  Doe  sells  his  wheat  he  does  not 
want  to  carry  gold  about  with  him  to  buy  the 
things  he  wants,  provided  he  can  be  safely 
assured  of  getting  it  when  he  wants  it.  The 
buyer  of  his  grain  might  give  a  written  promise 
to  pay  him  at  any  time  or  to  pay  anyone  else 
but  John  would  not  have  sufficient  confidence 
to  trust  him.  John  wants  a  promise  that  he 
will  consider  as  good  as  the  gold,  and  that 
other  people  will  have  equal  faith  in,  and  will 
be  willing  to  accept  instead  of  gold.  The 
printed  promise  of  the  Bank  of  Commerce  to 
pay  gold  on  demand  is  just  what  he  wants. 
When  he  holds  such  promises  rolled  up  in  his 
pocket,  he  knows  he  can  get  the  gold  for  them 
at  any  time.  If  he  gave  one  at  the  store,  the 
merchant  would  unhesitatingly  hand  him  the 
pair  of  boots  he  wanted,  and  give  him  some 
change  also.  He  knows  every  one  will  be 


78          A  Primer  of  Political  Economy 

eager  to  obtain  such  printed  promises,  and  wil- 
ling to  give  goods  for  them. 

Why  is  there  so  much  confidence  in  the  Bank 
of  Commerce  ?  Why  is  there  the  same  con- 
fidence in  the  printed  promises  of  all  Canadian 
banks ;  for  it  is  but  one  of  several  ?  Take 
one  of  these  bills  into  the  United  States,  away 
from  the  boundary  cities,  and  merchants  will 
refuse  to  give  goods  for  it.  But  the  people 
of  Canada  have  faith  in  the  banks  because 
their  financial  condition  is  investigated  by  the 
Government.  The  banks  are  obliged  to  pub- 
lish a  statement  every  month,  telling  how 
much  they  owe  and  how  much  is  owed  them, 
how  many  of  these  printed  promises  are  out- 
standing, how  much  gold  and  how  many  gov- 
ernment notes  they  have  to  meet  such  prom- 
ises, and  all  things  of  importance  regarding 
their  financial  standing.  It  is  also  a  provi- 
sion of  the  law  that  a  bank  cannot  be  in- 
corporated with  less  than  $250,000  in  gold 


Coins  and  Currency  79 

or  its  equivalent.  If  John  Doe  refers  to  any  of 
these  bank  statements  he  will  find  that  no  bank 
has  sufficient  gold  and  Dominion  notes  to  meet 
all  its  outstanding  promises  to  pay  on  demand. 
If  all  a  bank's  notes  were  brought  at  once  and 
payment  demanded,  it  would  not  be  able  to 
meet  the  demand,  and  would  be  obliged  to 
suspend  business  till  it  could  turn  some  of  its 
other  assets  into  money.  But  that  fact  does 
not  cause  John  the  least  uneasiness.  He 
knows  that  though  his  house  and  barns  cannot 
resist  a  cyclone,  they  can  resist  the  severest 
stress  of  ordinary  weather,  and  he  feels  secure. 
In  the  same  way  he  knows  that  though  the 
bank  cannot  meet  an  extraordinary  demand 
from  all  note  holders  at  once  it  can  meet  the 
strongest  demand  that  will  occur  in  the  ordinary 
course  of  business.  He  knows  that  although 
the  bank  cannot  pay  all  note  holders  at  once, 
it  can  pay  him  at  any  time  should  he  want  the 
gold,  and  that  is  all  the  assurance  he  requires. 


8o          A  Primer  of  Political  Economy 

Thus  the  printed  promises  or  notes  of  the 
banks,  in  greater  volume  than  the  gold  these 
institutions  possess,  pass  freely  from  hand  to 
hand  and  are  accepted  as  readily  as  the  gold 
itself,  even  though  they  are  not  legal  tender 
and  not  guaranteed  by  the  Government  It  is 
an  advantage  for  any  corporation  thus  to  aug- 
ment its  store  of  money,  and  be  able  to  use  its 
credit  as  well  as  its  gold.  The  Dominion  Gov- 
ernment pursues  that  advantageous  policy,  as 
well  as  the  banks.  It  issues  notes  to  a  greater 
amount  than  it  holds  gold  to  redeem  them.  To 
prevent  these  notes  from  returning  to  the  Re- 
ceiver General  for  redemption,  the  Government 
compels  the  banks  to  keep  forty  per  cent  of 
the  reserves  they  hold  for  safety,  in  Dominion 
notes.  When  a  bank  is  preparing  its  monthly 
statement,  if  it  finds  that  it  has  less  than  the 
requisite  proportion  of  Dominion  notes,  it  is 
obliged  to  buy  them  with  gold  from  a  Deputy 
Receiver  General.  That  helps  to  keep  the 


Coins  and  Currency  81 

Dominion's  promises  or  notes  from  returning  for 
redemption,  as  does  also  the  provision  restrain- 
ing the  banks  from  issuing  notes  of  smaller 
denominations  than  five  dollars.  The  people 
continually  require  the  Dominion  Government's 
ones,  twos,  and  fours  for  making  change. 

John  Doe  when  parting  with  his  wheat  would 
receive  a  printed  promise  that  the  Bank  of 
Commerce  would  pay  him  or  the  bearer  on 
demand,  five  dollars,  meaning  116.1  grains  of 
gold.  He  would  give  that  promise  to  the  mer- 
chant and  obtain  the  pair  of  boots  he  wanted. 
To  make  up  the  difference  in  value,  the  mer- 
chant would  give  him  a  printed  promise  that 
the  Dominion  would  pay  the  holder  of  it  on 
demand,  one  dollar,  and  also  a  silver  coin 
stamped  "  Twenty-five  Cents."  The  twenty- 
five-cent  coin  would  contain  83.25  grains  of  sil- 
ver and  some  alloy  to  harden  it.  At  the  time 
when  that  weight  of  silver  was  chosen,  it  was 
about  the  same  value  as  quarter  of  a  gold  dollar 


82          A  Primer  of  Political  Economy 

of  23.22  grains.*  The  object  was  to  have  the 
gold  coin  and  the  silver  coin  of  the  same  value. 
The  maintenance  of  that  parity  was  of  course 
impossible,  values  being  subject  to  continual 
change  through  the  law  of  supply  and  demand 
or  marginal  utility.  To  avoid  the  confusion  of 
having  gold  and  silver  dollars  of  different 
values,  the  silver  coins  are  issued  only  in 
limited  numbers  and  are  legal  money  only  to 
the  extent  of  ten  dollars.  A  man  entitled  to 
receive  more  than  ten  dollars  need  not  accept 
silver  for  the  balance  in  excess  of  that  sum. 
In  small  amounts  silver  coins  are  accepted  as  a 
matter  of  convenience.  For  still  smaller 
change  there  is  a  bronze  coin  stamped  "  One 
Cent/'  The  metal  in  this  coin,  although  valu- 
able, is  not  worth  the  hundredth  part  of  a  dol- 
lar, for  which  it  is  accepted,  but  it  passes  freely 
from  hand  to  hand.  These  coins  are  legal 
tender  to  the  extent  of  twenty  cents. 

*  The  metal  in  American  silver  coins,  previous  to  1853,  was  ap- 
proximately equal  in  value  to  gold  coinage.  Canadian  silver  coins 
have  always  been  tokens,  limited  in  issue  and  use. 


CHAPTER  XI 

NATIONAL    BANKS,   GOLD   AND   SILVER 

WHEN  John  Doe  parted  with  his  wheat  for 
national  bank  notes  he  did  not  receive  gold 
but  the  security  of  the  United  States  that  the 
metal  would  be  delivered,  a  security  given 
through  the  bonds  mentioned  on  the  national 
bank  note.  A  bond  when  issued  by  the  Gov- 
ernment is  a  printed  acknowledgment  that  the 
whole  people,  through  their  government,  are 
in  debt  to  the  holder  of  it,  and  that  they  will 
pay  him  interest  during  the  currency  of  the 
debt,  and  the  principal  when  it  falls  due. 
When  a  government  becomes  unable  to  meet 
its  expenses,  through  the  cost  of  a  war  or  any 
other  outlay  above  income  or  revenue,  the 
favorite  method  of  borrowing  is  to  issue  bonds. 
83 


84          A  Primer  of  Political  Economy 

These  bonds  are  sold,  and  as  they  are  merely 
the  promissory  notes  of  the  Government,  the 
buyers  are  in  reality  lending  money  to  the 
Government,  or  the  whole  people,  on  notes. 
These  notes  or  bonds  are  excellent  security, 
and  are  made  to  serve  as  an  assurance,  by  the 
national  banks,  that  such  notes  as  John  Doe 
receives  for  his  wheat  and  pays  for  the  boots 
will  be  redeemed  on  demand.  If  a  few  men 
want  to  start  a  national  bank  they  must  have 
from  $50,000  to  $200,000  according  to  the 
population  of  the  town  or  city  in  which  they 
intend  to  locate,  the  smaller  amount  being 
accepted  in  towns  of  less  than  six  thousand 
inhabitants.  They  must  buy  government  bonds 
with  one-fourth  of  their  capital  if  it  is  under 
$150,000,  and  to  the  extent  of  at  least  $50,000 
if  their  capital  is  greater  than  $150,000.  These 
bonds  must  be  deposited  in  the  United  States 
Treasury,  and  for  purposes  of  circulation  the 
Government  issues  to  the  owners,  when  incor- 


National  Banks,  Gold  and  Silver        85 

porated  as  a  bank,  such  notes  as  were  received 
by  John  Doe  for  his  wheat,  to  the  extent  of 
ninety  per  cent  of  the  value  of  the  bonds. 
Thus  the  Government  holds  the  bonds  it  has 
issued,  but  which  belong  to  the  newly  formed 
bank  that  has  bought  them.  In  return  the 
bank  has  circulating  notes  which  it  loans  or 
otherwise  uses,  and  which  the  Government  is 
under  obligation  to  redeem.  When  John  Doe 
parts  with  his  wheat  for  these  notes  he  knows 
he  can  go  to  the  bank  and  get  the  promised 
gold,  or  the  government  notes  which  will 
enable  him  to  get  it. 

The  national  banks  are  required  to  report 
their  financial  condition  to  the  Government, 
and  the  report  of  the  First  National  Bank  is 
an  assurance  of  its  ability  to  pay  John  Doe  on 
demand.  But  even  if  it  should  fail,  its  bonds 
are  with  the  Government  as  security  and  will 
be  forfeited  to  pay  note  holders.  There  is,  in 
addition,  a  deposit  with  the  Government  of  five 


86  A  Primer  of  Political  Economy 

per  cent  of  the  notes  outstanding  against  each 
bank.  People  holding  national  bank  notes 
can  have  them  redeemed  in  gold  by  presenting 
them  at  the  treasury  in  sums  of  $1000  or  any 
multiple  thereof.  These  notes,  when  thus  re- 
deemed by  the  Government,  are  charged  against 
the  banks  issuing  them,  and  when  the  notes 
held  against  any  single  bank  amount  to  $500 
that  bank  must  buy  them  back  and  pay  for 
them  in  Government  notes.  National  bank 
notes  are  accepted  by  the  Government  in  pay- 
ment of  excise  and  all  taxes  and  dues  to  the 
United  States  except  the  duty  on  imports. 
They  are  also  legal  tender  for  all  debts  due  by 
the  Government  to  individuals,  except  interest 
on  the  public  debt  and  the  redemption  of  gov- 
ernment notes. 

The  silver  certificate  which  John  obtains  in 
change  is  a  more  complicated  affair.  It  sets 
forth  that  a  silver  dollar  has  been  deposited  in 
the  Treasury  of  the  United  States  and  is  pay- 


National  Banksy  Gold  and  Silver        87 

able  to  bearer  on  demand.  It  has  been  stated 
that  a  dollar  is  23.22  grains,  but  that  weight  of 
silver  would  be  far  less  valuable  than  the  same 
weight  of  gold.  The  yellow  metal,  as  we  have 
seen,  is  coined  into  dollars,  or  rather  into  eagles 
and  half  eagles  to  save  people  the  trouble  of 
weighing  it  themselves.  But  when  it  is  at- 
tempted to  coin  silver  for  the  same  purpose 
it  is  desirable  that  the  gold  and  silver  coins 
should  be,  not  of  the  same  weight,  but  of  the 
same  value.  With  that  end  in  view  the  silver 
dollar  is  made  heavier  than  the  gold  dollar  in 
the  same  proportion  that  silver  is  less  valuable 
than  gold.  The  last  coinage  ratio  adopted  for 
the  purpose  of  equalizing  the  value  of  the 
dollars  was  sixteen  to  one.  Because  gold  was 
generally  sixteen  times  more  valuable  than 
silver,  the  silver  dollar  was  made  sixteen  times 
as  heavy  as  the  dollar  of  gold.  As  the  value  of 
all  metals  must  vary  by  the  pressure  of  supply 
and  demand,  this  value  ratio  must  be  constantly 


88          A  Primer  of  Political  Economy 

changing.  Herodotus  states  that  in  the  year 
340  B.C.  the  value  ratio  of  gold  to  silver  was 
thirteen  to  one.  In  Rome  it  was  nine  to  one  in 
the  year  60  B.C.  Though  the  coinage  or  weight 
ratio  may  be  fixed  as  closely  as  possible  to  the 
value  ratio,  the  fluctuations  of  the  latter  will 
make  the  gold  or  the  silver  dollar  occasionally 
more  valuable.  John  Doe's  silver  certificate 
entitles  him  to  371.25  grains  of  that  metal, 
which,  in  the  fluctuation  of  values,  may  one  day 
be  worth  more  and  the  next  day  less  than  23.22 
grains  of  gold.  When  the  silver  is  worth  less 
than  the  gold,  John  will  be  inclined  to  pay  his 
debts  in  silver  dollars,  or  in  certificates  entitling 
the  holder  to  silver  dollars.  Every  6ne  else 
will  show  a  similar  inclination,  and  the  gold 
money  will  disappear.  It  will  be  found  more 
profitable  to  take  it  to  other  countries  where 
the  coinage  ratio  or  system  is  different,  or  to 
make  use  of  it  in  the  arts.  When  the  gold 
coin  is  worth  less  than  the  silver,  the  inclina- 


National  Banks,  Gold  and  Silver        89 

tion  will  be  in  the  opposite  direction,  hence  the 
less  valuable  coins  always  drive  the  more  valu- 
able out  of  circulation. 

In  1792  Congress  decided  to  coin  both  gold 
and  silver  dollars  at  a  weight  ratio  of  fifteen 
to  one,  that  being  as  near  an  estimate  as 
could  be  made  of  the  value  ratio.  It  was 
believed  that  gold  was  fifteen  times  as  valu- 
able as  silver.  So  the  silver  dollar  was  made 
to  weigh  fifteen  times  as  much  as  the  dollar 
of  gold.  The  weight  of  the  gold  dollar  was 
24.75  grains,  not  counting  the  cheaper  metal 
added  to  harden  it,  and  the  silver  dollar  con- 
tained 371.25  grains,  just  fifteen  times  as 
much  metal.  But  gold  was  worth  a  little 
more  than  fifteen  times  as  much  as  silver,  so 
the  coin  containing  24.75  grains  of  it  was 
more  valuable  than  the  371.25  grains  of  the 
white  metal.  Under  the  circumstances  the 
people  would  naturally  use  their  silver  to 
make  dollars  for  commerce,  sending  their 


go          A  Primer  of  Political  Economy 

gold  elsewhere.  The  gold  dollars  coined 
were  bought  by  English  goldsmiths.  But  the 
people  had  still  less  valuable  dollars  in  the 
clipped,  punched,  and  worn  foreign  coins,  so 
they  saved  both  their  gold  and  silver  for 
other  purposes.  A  few  silver  dollars  were 
coined  in  1830. 

In  1834  Congress  attempted  to  aid  the 
gold-mining  industry  by  changing  the  coin- 
age ratio  to  sixteen  to  one.  The  silver  dol- 
lar was  left  at  371.25  grains,  although  the 
alloy  was  slightly  changed,  but  the  weight  of 
pure  metal  in  the  gold  dollar  was  reduced  to 
23.22  grains.  At  its  former  weight  the  gold 
dollar  was  worth  more  than  the  silver  dollar. 
But  the  change  was  greater  than  the  differ- 
ence in  value,  and  it  made  the  gold  dollar, 
not  equal  to,  but  less  than  the  silver,  in 
value.  As  a  consequence  only  a  few  silver 
dollars  were  coined,  and  they  were  too  valu- 
able to  be  used  as  money.  Gold  became  the 


National  Banks,  Gold  and  Silver        91 

money  of  the  country,  because  it  was  less 
valuable  than  silver  at  the  weight  adopted, 
and  when  in  1873  Congress  abolished  the 
free  coinage  of  silver  for  the  owners  of  that 
metal,  it  excited  no  general  interest,  silver 
being  too  valuable  to  be  used  for  that  pur- 
pose. Shortly  afterwards  the  relative  value 
of  the  metals  approached  and  passed  the 
coinage  ratio.  By  a  fall  in  the  value  of  sil- 
ver, an  increase  in  the  value  of  gold,  or  both 
changes  acting  together,  gold  became  sixteen 
times,  and  more  than  sixteen  times  as  valu- 
able as  silver.  Silver  miners  then  complained 
that  they  could  not  have  371.25  grains  of 
their  metal  coined  into  a  dollar  as  before. 

Congress  decided  in  1878  as  a  measure  of 
compensation,  to  buy  sufficient  silver  at  the 
market  price  to  coin  $  2,000,000  a  month.  The 
silver  bought  under  that  act  was  sufficient  to 
coin  378,166,795  dollars  but  the  metal  had  so 
fallen  in  value  that  it  cost  only  303,190,262 


92          A  Primer  of  Political  Economy 

gold  dollars.  The  silver  certificate  received 
by  John  Doe  in  change  was  put  in  circula- 
tion by  the  Government  in  paying  for  this 
silver.  In  1890  Congress  enacted  that  4,500,- 
ooo  ounces  of  silver  be  purchased  every 
month,  with  a  requirement  regarding  coin- 
age into  dollars  for  the  redemption  of  legal- 
tender  notes  to  be  issued.  Under  that  law, 
which  was  repealed  in  1893,  the  Government 
purchased  168,674,682  ounces  of  silver  for 
$I55>93I>002,  which  were  gold  or  virtually 
promises  to  pay  gold.  These  purchases  tended 
to  compensate  silver  producers  for  the  loss  of 
the  privilege  of  having  their  metal  coined 
into  dollars. 

For  his  dollar  of  change  John  Doe  might 
receive  a  greenback  which  would  entitle  him 
to  23.22  grains  of  gold,  a  treasury  note  prom- 
ising him  one  dollar  in  coin,  which  might 
be  23.22  grains  of  gold  or  371.25  grains  of 
silver,  a  big  silver  dollar  which  would  con- 


National  Banks,  Gold  and  Silver       93 

tain  371.25  grains  of  that  metal,  or  a  silver 
certificate  promising  him  the  silver  dollar  on 
demand.  Although  23.22  grains  of  gold  are 
worth  more  than  371.25  grains  of  silver,  he 
would  accept  these  notes  or  promises  as  if 
they  were  of  equal  value,  not  at  the  average 
value  of  the  two,  but  at  the  value  of  the 
gold  coin.  He  would  do  so  because  the 
Government,  to  avoid  having  dollars  of  un- 
equal value,  has  promised  to  redeem  all  the 
notes  in  the  gold  coins.  Although  the  holder 
of  a  treasury  note  has  a  promise  of  coin 
only,  the  Government  will  not  avail  itself  of 
its  right  to  pay  him  with  the  less  valuable 
metal,  but  will  give  him  the  gold  if  he  asks 
for  it.  The  holder  of  a  silver  certificate,  too, 
though  entitled  to  only  a  silver  dollar,  can 
obtain  a  gold  dollar  on  demand.  And  the 
big  silver  dollar  itself  is  accepted  by  the 
Government,  consequently  it  can  be  exchanged 
for  the  23.22  grains  of  gold.  The  quarter 


94          A  Primer  of  Political  Economy 

dollar  is  a  subsidiary  coin,  on  the  same  prin- 
ciple as  the  Canadian  quarter  dollar  described 
in  the  previous  chapter. 

There  are  also  some  smaller  fractional  sil- 
ver, nickel,  and  copper  coins,  which  are  legal 
tender  for  limited  amounts. 


CHAPTER  XII 

BRITISH    CURRENCY 

IN  England  John  Doe  would  have  paid  for 
the  boots  with  a  sovereign,  a  coin  containing 
1 13  grains  of  gold  and  some  alloys.  The 
balance  would  be  returned  in  silver  coins  of 
less  value  than  their  stamped  denominations, 
but  accepted  freely  for  small  amounts.  There 
are  no  notes  circulated  in  England,  except 
those  issued  by  the  Bank  of  England,  and  the 
smallest  denomination  is  ^£5,  sometimes  called 
five  sovereigns,  equal  to  565  grains  of  gold. 
These  notes  are  secured  in  part  by  the  debt  of 
the  nation  to  the  bank,  but  all  additional  issues 
must  be  secured  to  their  full  amount  by  gold 
held  in  the  bank's  vault  for  the  redemption 
of  them.  It  is  in  consequence  no  advantage 
95 


g6          A  Primer  of  Political  Economy 

to  the  bank  to  increase  the  issue  of  notes,  as 
the  gold  itself  could  be  loaned  as  profitably. 
In  Scotland  and  Ireland  there  are  banks 
authorized  to  issue  circulating  notes  of  £>\ 
and  upwards.  The  amount  they  are  per- 
mitted to  issue  was  restricted  by  legislation  in 
1845,  t°  their  average  circulation  for  the  twelve 
months  preceding  May  I,  of  that  year.  The 
privilege  of  issuing  notes  was  thus  secured  to 
the  banks  which  then  possessed  it,  but  there 
is  no  provision  for  the  establishment  of  new 
banks  of  issue.  For  any  issue  of  notes  in 
excess  of  the  amount  authorized  in  1845  the 
banks  must  hold  an  equal  amount  of  gold  and 
silver  coin,  the  silver  to  be  not  more,  in  amount, 
than  one-fourth  of  the  gold.  Provision  is  made 
for  the  uniting  of  banks  and  the  combining  of 
their  authorized  note  issue. 

All  these  weights  used  in  coinage  seem  irreg- 
ular and  likely  to  confuse,  but  the  lack  of  regu- 
larity comes  from  reluctance  to  change  the 


British  Currency  97 

standards.  When  people  are  accustomed  to 
use  a  coin  of  a  certain  weight  they  know  its 
value  in  all  the  things  they  buy  and  sell.  They 
know  how  much  cloth,  how  much  coal,  how 
much  sugar,  and  how  much  flour  a  dollar  or 
a  sovereign  will  buy,  and  the  coin  comes  to 
fill  in  their  minds  the  place  of  a  standard  of 
value.  A  change  in  the  weight  of  the  coin 
would  throw  all  calculations  into  confusion. 
There  is  consequently  a  reluctance  to  change 
the  coinage  weights.  When  laws  have  been 
enacted  fixing  regular  standards  for  other 
weights  and  measures,  the  coins  have  not  been 
changed,  hence  their  weights  are  irregular 
when  compared  with  the  standards  used  in 
weighing  ordinary  commodities.  The  Cana- 
dian cent  has  been  made  regular,  being  exactly 
one  inch  in  diameter  and  weighing  the  one- 
hundredth  part  of  a  pound.  But  as  it  is  only 
a  token,  and  the  value  of  the  metal  it  contains 
is  of  little  consequence,  it  could  be  made  of  a 


98          A  Primer  of  Political  Economy 

regular  weight  without  disturbing  any  calcula- 
tions as  to  value.  The  same  could  not  be  done 
with  gold  coins  without  causing  confusion  as 
to  values,  although  the  use  of  ounces  and 
grains,  instead  of  dollars  might  remove  false 
theories  as  to  standards  of  value. 

Governments  recognize  the  need  of  facilitat- 
ing the  transfer  of  raw  metal  into  coin.  Almost 
all  debts  are  contracted  in  the  form  of  obliga- 
tions to  pay,  not  the  raw  metal  or  bullion,  but 
currency  in  some  recognized  form.  If  the 
transfer  of  raw  gold  into  coin  were  a  difficult 
matter  it  might  cause  serious  embarrassment. 
The  British  standard  for  coining  is  22  parts 
of  pure  gold  and  2  parts  of  alloy,  and  anyone 
taking  such  gold  to  the  mint  can  obtain  it 
back  in  coins  with  but  a  very  slight  deduction 
for  the  work.  For  an  ounce  of  standard  gold 
the  mint  gives  back,  £3,  175-.,  and  ioj</.  in  coin. 
For  those  who  do  not  wish  to  wait  for  the  mint- 
ing process,  the  Bank  of  England  is  obliged 


British  Currency  99 

to  pay  ,£3,  17^.,  and  9^.,  when  the  gold  is 
presented.  Silver  is  not  thus  coined  on  private 
account,  as  it  is  cheap  and  the  people  would 
use  it  exclusively  as  long  as  they  could  get  rid 
of  it  at  its  token  value.  The  Government  limits 
the  silver  coinage,  and  retains  the  difference 
between  the  cost  of  the  metal  and  the  stamped 
or  token  value  of  the  coins. 

John  Doe  gave  the  merchant  more  money  for 
the  boots  than  was  paid  to  the  manufacturer 
for  them.  The  difference  or  profit  of  the  mer- 
chant exemplifies  the  method  of  remunerating 
for  the  work  of  distribution.  After  a  great 
factory  has  turned  out  a  consignment  of  boots, 
they  must  be  distributed  to  the  people  who 
want  them.  Whether  the  man  who  distributes 
them  goes  along  the  road  with  them  in  his 
wagon  day  after  day,  or  gathers  all  kinds  of 
boots  from  different  factories  in  a  store  that 
buyers  may  look  them  over  and  make  their 
choice,  the  service  he  renders  purchasers  is  the 


ioo        A  Primer  of  Political  Economy 

same  in  principle.  He  saves  them  the  trouble 
of  going  from  factory  to  factory,  and  he  does 
work  that  would  otherwise  have  to  be  done 
under  greater  inconvenience  at  the  factories. 
It  has  been  found  advantageous  for  merchants 
to  gather  various  lines  of  goods  together  and 
hold  them  to  await  the  convenience  of  cus- 
tomers. If  John  Doe  were  forced  to  go  all 
over  the  country  to  obtain  his  supplies  he 
would  find  it  as  great  a  task  as  the  cultivation 
of  his  farm.  It  is  more  profitable  for  him  to 
pay  the  merchant  an  advance  on  factory  prices. 
If  the  merchant  asks  too  great  an  advance  or 
profit  for  the  service  he  renders,  some  one  else 
will  be  attracted  by  the  large  profits  and  start 
an  opposition  establishment.  This  free  com- 
petition tends  to  regulate  the  profits  of  the 
merchant,  and  make  them  coincide  with  the 
value  of  the  work  he  performs.  He  is  a  useful 
member  of  the  community  rendering  a  service 
as  necessary  as  that  of  the  whaler,  the  miner, 


British  Currency  101 

the  tanner,  or  the  factory  hand.  It  is  not  only 
necessary  that  boots  be  made  by  the  labor  of 
scores  of  hands  in  all  quarters  of  the  world, 
cooperating  consciously  or  unconsciously.  The 
boots  must  be  held  to  suit  the  convenience  of 
customers,  and  every  one  who  takes  them  must 
be  made  to  return  payment.  The  payment 
must  be  transmitted  to  the  workers  in  many 
lands,  who  have  done  their  part  in  the  compli- 
cated task  of  production.  The  same  is  true  of 
every  other  line  of  merchandise,  and  all  who 
contribute  toward  the  consummation  of  this 
complicated  result  in  production  and  exchange, 
whether  they  be  laborers,  mechanics,  overseers, 
merchants,  carriers,  or  bankers,  are  serving  use- 
ful functions. 


CHAPTER  XIII 

PAYING   ALL   THE   WORKERS 

WE  have  seen  how  John  Doe,  by  growing 
wheat,  paid  the  merchant  for  a  pair  of  boots, 
but  have  not  seen  how  he  paid  all  the  men, 
who,  years  before,  and  in  different  parts  of 
the  world,  cooperated  in  the  many  lines  of 
work  necessary  to  their  production.  We  must 
see  how  he  pays  the  Gaucho  who  galloped 
at  night  after  the  stampeded  herd  of  cattle, 
the  whaler  who  fired  his  harpoon  or  threw 
his  lance  into  the  oily  monster  of  the  ocean, 
the  workmen  whose  flesh  and  bones  have 
been  eroded  in  the  stifling  air  of  the  alkali 
works,  the  Brazilian  who  slashed  his  way 
through  the  malarial  swamps  of  the  Amazon, 
the  miner  who  worked  by  candle-light  in  the 
102 


Paying  all  the   Workers  103 

dark  and  dripping  tunnels  of  the  mountains, 
all  down  to  the  busy  workers  in  the  factories, 
and  the  clerk  who  served  behind  the  counter. 
This  difficult  and  necessarily  complicated  work 
is  achieved  by  the  instrumentality  of  capital, 
which  is  the  saved  results  of  labor  in  the 
past,  devoted  to  increasing  the  productive 
power  of  present  or  current  labor.  While 
men  work  with  a  view  to  satisfying  their  im- 
mediate wants  only,  results  are  necessarily 
meagre,  for  it  is  impossible  for  each  to  con- 
fine himself  to  one  special  occupation.  The 
Esquimau  makes  his  own  boots,  the  many 
slow  processes  entailing  much  patient  labor. 
In  a  modern  shoe  factory  a  man  will  stand 
day  after  day  putting  on  rough  heels,  but 
such  specializing  cannot  be  accomplished 
without  the  saved  results  of  past  labor,  in  the 
shape  of  machinery,  buildings,  and  abundance 
of  material,  also  food,  clothing,  and  other  nec- 
essaries for  the  workers,  during  the  time  that 


IO4        A  Primer  of  Political  Economy 

must  elapse  between  the  production  and  con- 
sumption of  their  goods.  When  a  workman 
in  a  factory  put  heels  on  the  boots  which 
were  bought  by  John  Doe,  he  caused  the  ma- 
terial with  which  he  was  working,  the  leather 
and  nails,  to  become  more  valuable  than  they 
were  before.  They  were  brought  by  his 
labor  nearer  to  a  condition  in  which  they 
would  be  serviceable  to  man.  But  some  time 
must  elapse  before  John  Doe  will  want  them 
and  be  willing  to  give  the  wheat  from  his 
farm  for  them.  During  the  interval  the  work- 
man is  putting  heels  on  scores  of  boots,  but 
must  depend  for  his  living,  for  the  satisfac- 
tion of  his  immediate  wants,  on  the  saved  re- 
sult of  past  labor.  Without  that  he  must  live 
like  the  Esquimaux,  hunting  and  fishing  for 
daily  maintenance  and  taking  time  to  make 
boots  for  himself. 

When  the  Indians  gathered  maize   or  corn 
for   their   immediate   wants   only,  these  wants 


-V        OF  THE  A 

UNIVERSITY   I 

Paying  all  the    Workers  105 

were  but  poorly  supplied.  But  they  learned 
the  advantage  of  gathering  more,  for  seeding 
purposes,  instead  of  leaving  that  to  the  uncer- 
tain processes  of  nature.  In  that  precaution- 
ary work  they  became  capitalists,  devoting 
the  saved  results  of  past  labor  to  making 
present  labor  more  productive.  They  also 
made  rude  implements  for  turning  over  the 
soil.  In  making  digging  flints  as  well  as 
in  making  bows,  arrows,  and  other  weapons 
of  the  chase,  they  were  working,  not  to  sat- 
isfy immediate  needs,  but  to  increase  the  re- 
sults of  future  work.  By  this  foresight  and 
self-denial  they  brought  capital  into  existence 
and  called  it  to  their  aid. 

A  shoemaker  working  alone  at  his  bench 
does  many  of  the  later  operations  of  making 
shoes.  For  that  he  requires  capital,  the  saved 
results  of  past  labor,  and  he  has  it  in  the 
form  of  a  bench,  lasts,  awls,  pinchers,  and 
other  tools  of  his  trade.  These  are  not  di- 


io6        A  Primer  of  Political  Economy 

rectly  the  results  of  his  past  labor,  for  he 
could  not  make  them.  He  began  work  with 
other  people's  tools  and  traded  the  products 
of  that  work  for  those  he  now  possesses.  He 
has  also  some  capital  in  the  form  of  money, 
and  when  a  customer  orders  a  pair  of  boots 
he  buys  the  uppers,  the  soles,  the  leather, 
and  other  material  needed  to  make  them. 
When  no  orders  are  in  he  may  have  sufficient 
capital  to  buy  material  and  make  boots  for 
future  sale,  thus  avoiding  loss  of  time.  The 
possession  of  this  capital,  both  in  the  form 
of  tools  and  money  is  an  advantage,  and  one 
for  which  the  shoemaker  would  be  willing  to 
pay  if  he  did  not  own  sufficient  capital  him- 
self. The  payment  he  would  make  for  the 
use  of  it  would  be  interest,  a  subject  which 
will  be  dealt  with  more  extensively  in  a  later 
chapter.  If  the  shoemaker  works  hard  and 
lives  frugally,  he  becomes  able  to  control 
more  capital.  He  does  not  gather  an  abun- 


Paying  all  the    Workers  107 

dance  of  tools  and  leather  about  him.  His 
income  is  greater  than  his  expenses  and  he 
deposits  the  balance  in  a  bank  every  week. 
In  that  way  he  gets  the  bank  in  his  debt,  and 
knows  he  can  draw  the  universally  desired 
gold  at  any  time.  He  may  have  sufficient  to 
buy  one  of  the  big  machines  in  the  factory, 
but  it  would  be  no  use  while  he  works  alone. 
When  he  is  able  to  make  a  bargain  with  a 
number  of  other  shoemakers  equally  fortu- 
nate, he  buys  a  nailing  machine  for  use  in  a 
factory,  another  buys  a  lasting  machine,  an- 
other a  sewing  machine,  and  another  an  elec- 
tric motor  and  shafting  for  supplying  power. 
A  large  number  thus  combining  their  sav- 
ings can  establish  a  factory  fully  equipped 
with  tools  and  material.  By  separating  the 
work  and  each  performing  some  single  oper- 
ation, the  productive  power  of  each  is  in- 
creased. A  factory  with  fifty  workmen  can 
produce  more  than  double  the  output  of  a 


io8         A  Primer  of  Political  Economy 

factory  with  twenty-five  workmen.  For  the 
same  reason  one  hundred  men  in  a  factory 
can  do  more  than  double  the  work  of  fifty. 
These  cooperating  shoemakers  may  sell  their 
products  to  a  merchant,  who  can  dispose  of 
them  to  the  wearers  through  retail  dealers, 
or  they  may  have  their  own  organization 
or  establishment  of  distribution,  consisting  of 
wholesale  and  retail  stores.  In  either  case 
they  must  own  or  borrow  sufficient  savings  to 
maintain  themselves  and  their  factory  till  the 
returns  from  sales  are  available  to  make  more 
and  other  purchases. 


CHAPTER  XIV 

THE   CAPITALIST 

THE  factory  described  in  the  last  chapter 
would  be  called  cooperative,  because  the  men 
who  work  in  it  own  the  capital  and  are 
remunerated  directly  from  the  returns.  Such 
factories  are  not  nearly  so  common  as  those 
in  which  one  man  or  a  small  company  of 
men  own  the  capital,  and  the  workmen  are 
paid  in  wages  for  their  services.  If  a  man 
wishes  to  start  a  shoe  factory  on  that  prin- 
ciple and  is  possessed  of  wealth  the  matter 
is  easily  arranged,  though  his  possessions  con- 
sist only  of  Canadian,  United  States,  or  British 
bonds,  or  other  similar  evidences  of  debt. 
These  bonds  cannot  maintain  workmen ;  they 
are  not  machinery,  leather,  or  other  material 
109 


HO        A  Primer  of  Political  Economy 

required  in  shoemaking;  in  fact,  they  are  not 
wealth  properly  so  called.  They  merely  show 
that  the  whole  people  are  in  debt  to  this 
man  who  desires  to  start  a  shoe  factory.  But 
the  difficulties  disappear,  because  the  people 
in  his  debt  are  possessed  of  the  capital  or 
savings  necessary  to  his  purpose.  They  have 
sufficient  food  to  maintain  the  workers  during 
the  initial  stages ;  clothing  sufficient  for  similar 
demands ;  brick,  stone,  lumber,  iron,  machinery, 
leather,  and  all  essentials,  or  sufficient  saved 
wealth  to  purchase  the  things  required.  If 
the  people  did  not  possess  these  savings  the 
bondholder  could  not  start  a  shoe  factory  nor 
any  other  manufacturing  or  commercial  enter- 
prise on  his  bonds.  If  he  holds  bonds  issued 
by  a  savage  tribe  in  Africa  or  elsewhere,  he 
cannot  secure  material  for  a  factory  with 
them.  However  deeply  the  tribe  may  be  in 
his  debt,  if  there  is  no  prospect  of  the  debt 
being  paid  the  bonds  are  of  no  value.  But 


The  Capitalist  in 

the  bonds  of  a  solvent  country  he  can  take 
to  the  stock-exchange  and  sell  for  money, 
with  which  he  pays  the  builders  of  his  factory 
and  buys  machinery  and  a  complete  outfit  of 
material.  Then  he  can  hire  shoemakers  and 
other  necessary  workers. 

At  the  end  of  a  week  the  shoemakers  have 
made  his  material  more  valuable,  and  he  pays 
them  their  wages  in  money,  which  procures 
for  them  the  things  they  require.  Next  week 
he  again  pays  them  their  wages,  his  capital 
being  thus  decreased  in  one  form,  and  more 
largely  increased  in  another.  Soon  he  has  a 
large  stock  of  finished  boots  which  he  sells 
to  a  wholesale  dealer,  receiving  more  than  he 
paid  for  wages  and  material.  The  advantages 
of  working  together  in  a  large  force  are  so 
great  that  he  can  pay  the  shoemakers  as 
much  as  or  more  than  they  could  earn  work- 
ing alone  at  their  benches,  and  have  a  sub- 
stantial balance  for  himself.  This  balance,  so 


112        A  Primer  of  Political  Economy 

far  as  it  is  derived  from  dividing  and  special- 
izing the  trade,  is  the  interest  on  his  capital 
invested  in  the  business. 

It  is  through  this  method  of  using  capital 
that  John  Doe  pays  the  many  workers  in 
various  lands  who  assisted  in  making  the  pair 
of  boots  which  he  bought.  One  man  decides 
to  invest  the  wealth  in  his  possession  or  at 
his  disposal  in  a  whaling  expedition.  By  sell- 
ing it  or  trading  it  he  procures  a  ship,  fits  it 
out  with  try-works  for  melting  the  blubber, 
barrels,  harpoons,  lances,  small  boats,  and  all 
the  accessories  of  the  work.  He  lays  in  a 
store  of  provisions  sufficient  to  maintain  the 
crew  on  a  long  voyage,  and  engages  the 
necessary  force  of  men.  They  have  their 
maintenance  aboard  during  the  voyage,  and 
on  arrival  in  port  are  paid  off,  the  owner's 
capital  in  one  form  being  almost  exhausted, 
while  he  is  richer  in  the  oil  that  has  been 
gathered.  For  it  he  is  paid  by  the  currier 


The  Capitalist  113 

who  wants  it  in  preparing  leather.  The  cur- 
rier is  recouped  for  this  and  other  outlays 
when  he  sells  the  leather  to  the  shoe  manu- 
facturer, who  is  paid  in  turn  by  the  mer- 
chant. Thus  when  Joe  Doe  pays  for  the 
boots  over  the  counter,  a  part  of  his  money 
goes  to  adjust  the  payment  made  to  the 
whalers  two  years  before  at  the  end  of  their 
voyage. 

The  miners  who  work  the  drills  and  hoist 
the  ore  in  the  heart  of  the  mountain  are  paid 
by  the  owner  of  the  mine  and  its  machinery, 
who  is  paid  in  turn  for  his  metal  by  the  maker 
of  shoe  eyelets,  and  a  part  of  John  Doe's  pay- 
ment recoups  the  merchant,  the  manufacturer, 
the  eyelet  maker,  and  the  mine  owner  for 
wages  paid  to  the  miner.  The  Gaucho  of  the 
southern  plains  is  paid  by  the  herdsman,  who 
receives  his  pay  from  the  English  importer  or 
butcher.  For  the  hide  the  butcher  is  paid  by 
the  tanner,  the  tanner  by  the  currier,  and  the 


H4        A  Primer  of  Political  Economy 

currier  by  the  boot  manufacturer.  Through 
him  and  the  merchant  John  Doe  remunerates 
the  Gaucho  for  his  aid  in  making  the  pair  of 
boots. 

The  native  Brazilian  who  blinks  in  the 
smoke  is  paid  by  the  recognized  owner  of 
the  forest,  who  supplies  him  with  food,  and 
through  a  long  list  of  exchanges  the  last  pay- 
ment for  the  rubber  in  the  cemented  joints 
of  the  boots  is  made  by  John  Doe.  In  the 
same  way,  John  finally  remunerates  those  who 
pay  the  workmen  who  smart  and  smother 
in  the  alkali  works,  the  men  who  attend  the 
machines  in  the  factory,  and  the  clerk  who 
exhibits  and  parcels  up  the  boots  in  the  mer- 
chant's establishment.  The  workers  mentioned 
are  but  a  few  of  the  thousands  who  helped 
to  make  the  pair  of  boots,  the  boots  are  but 
one  of  the  thousands  of  useful  articles  in 
which  each  of  their  products  have  been  con- 
sumed, and  the  wheat  grown  by  John  Doe 


The  Capitalist  115 

goes  to  satisfy  quite  as  great  a  multitude  of 
wants.  In  the  long  transition  from  producer 
to  consumer,  some  have  been  paid  at  once 
by  others  in  a  position  to  wait  for  returns. 
Those  in  a  position  to  make  such  advances 
are  called  capitalists. 


CHAPTER  XV 

INTEREST JOINT    STOCK   COMPANIES TRUSTS 

WE  have  seen  the  advantage  which  comes 
with  the  possession  of  capital,  how  it  enables 
the  owner  to  wait  for  returns  and  specialize 
labor,  thus  increasing  its  product.  This  in- 
crease in  the  productive  power  of  labor  on 
account  of  the  employment  of  capital  is  inter- 
est. In  the  examples  considered,  every  man 
employing  or  investing  capital  owned  it  him- 
self, and  obtained  his  interest  in  the  form  of 
increased  products.  The  examples  extended 
from  the  Indian  who  saved  seed  corn  to  the 
investor  in  a  factory.  But  it  is  often  advan- 
tageous for  a  man  to  invest  or  employ  capital 
which  he  does  not  own.  One  may  have  special 
aptitude  for  managing  a  shoe  factory  but  may 
116 


Interest — Joint  Stock  Companies —  Trusts     117 

lack  the  requisite  capital,  while  another  owning 
sufficient  capital  may  have  but  little  ability  for 
conducting  the  enterprise.  If  the  latter  estab- 
lishes a  factory  he  will  achieve  but  indifferent 
results,  and  the  former,  through  the  lack  of 
capital,  may  not  be  able  to  make  use  of  his 
ability  for  factory  management.  It  is  clearly 
to  the  advantage  of  him  who  is  competent  to 
manage  a  factory,  to  borrow  the  capital  of  the 
owner,  paying  him  a  regular  amount  yearly  for 
its  use.  This  regular  payment  is  another  form 
of  interest,  and  it  is  bargained  for  at  a  certain 
rate  per  cent  per  annum.  The  factory  manager 
does  not  seek  for  some  one  who  will  lend  him 
the  necessary  machinery  and  materials.  He 
simply  borrows  money,  agreeing  to  pay  a  cer- 
tain rate  per  cent  yearly  for  its  use,  and  to 
return  it  at  a  specified  time.  With  the  bor- 
rowed money  he  buys  all  the  things  needed  in 
his  business,  just  as  if  he  owned  it  him- 
self. Thus  while  in  reality  he  borrows  a 


n8         A  Primer  of  Political  Economy 

factory  and  all  the  accessories  for  increasing 
the  productive  power  of  labor,  the  recorded 
transaction  is  the  borrowing  of  a  sum  of  money 
at  interest. 

This  borrowing  is  so  common  that  banks  and 
other  institutions  are  organized  to  facilitate  it. 
They  receive  the  small  savings  and  surplus 
money  of  many  people,  and  pay  a  low  rate  of 
interest  on  it.  Their  business  is  to  lend  it  again 
at  higher  rates,  the  difference  being  the  pay- 
ment for  their  services  in  concentrating  the 
savings  where  they  are  needed.  The  differ- 
ence also  makes  good  the  many  losses  they 
suffer  through  bad  debts.  The  banks  with 
power  to  issue  notes  lend  their  credit,  which 
serves  the  purpose  of  money,  and  derive  a  con- 
siderable advantage  from  that  line  of  business. 
It  is  seldom  that  a  man  can  borrow  the  entire 
amount  needed  to  establish  a  manufacturing 
industry.  But  some  of  those  with  industries 
and  business  establishments  already  in  opera- 


Interest — Joint  Stock  Companies —  Trusts     119 

tion  are  continually  extending  the  scope  of  their 
business  beyond  the  limits  of  the  capital  they 
own,  and  are  in  consequence  continually  in 
need  of  advances  of  money  at  interest.  In 
reality  they  borrow  an  additional  machine,  an 
additional  supply  of  goods  or  an  additional 
building  for  an  extension  of  work  or  business. 
We  have  seen  how  a  man  or  a  set  of  men 
owning  wealth,  or  having  the  community  or 
some  reliable  firm  in  debt,  can  start  a  shoe 
factory.  We  have  considered  the  cooperative 
factory,  and  the  factory  owned  by  a  single  in- 
vestor. Another  common  method  of  combining 
the  capital  of  several  persons  in  one  industry  is 
the  organization  of  a  joint  stock  company.  If 
ten  men  uniting  to  carry  on  a  cooperative  shoe 
factory,  decide  to  adopt  the  joint  stock  method, 
they  estimate  the  value  of  their  machinery, 
material,  and  business  establishment.  If  it  is 
$10,000  they  get  a  legislative  act  passed  incor- 
porating them  with  a  capital  of  that  amount. 


I2O        A  Primer  of  Political  Economy 

That  act  gives  legal  existence  to  a  body  corpo- 
rate. Each  cooperating  partner,  if  all  have 
invested  equally,  receives  $1000  stock  in  ten 
shares  of  $100  each.  They  then  meet  and  elect 
from  among  themselves,  a  board  of  managers  to 
conduct  the  business.  This  board  holds  office 
generally  for  a  year.  At  every  board  election 
each  stock-holder's  vote  counts  according  to  the 
number  of  shares  he  holds.  The  profits  or 
returns  from  business,  above  expenses,  are 
divided  among  the  stock-holders,  each  getting 
a  yearly  or  half-yearly  dividend,  estimated  as  a 
certain  percentage  on  his  stock.  Let  us  sup- 
pose that  five  men  uniting  to  conduct  a  stove- 
foundry,  obtain  an  act  incorporating  them  with, 
say,  $1,000,000  capital  stock.  One  puts  in 
$100,000  and  receives  one  thousand  shares  at 
$100  each.  Another  puts  in  $200,000,  for 
which  he  receives  two  thousand  shares,  and  two 
others  put  in  $50,000  each,  receiving  five 
hundred  shares  each  as  an  acknowledgment. 


Interest — Joint  Stock  Companies —  Trusts     121 

The  fifth  has  no  money  but  has  special  knowl- 
edge of  the  business,  and  for  that  he  is  given 
one  thousand  shares.  There  are  now  five  thou- 
sand shares  of  $100  each,  or  half  the  total 
authorized  issue  owned  by  these  five  men,  and 
the  company  has  in  its  treasury  $400,000  con- 
tributed by  four  of  its  members.  All  five  stock- 
holders vote  according  to  the  stock  they  hold, 
in  electing  a  board  of  directors,  which  will 
doubtless  be  themselves.  With  the  $400,000 
they  erect  buildings  and  cupolas,  buy  iron,  sand, 
flasks,  engines,  boilers,  machinery,  and  all  things 
needed  for  the  business.  They  hire  workmen 
and  proceed  with  the  making  of  stoves.  Before 
returns  begin  to  come  in  their  capital  is  ex- 
hausted. They  can  borrow  money  from  a  bank, 
or  sell  some  of  the  remaining  five  thousand 
shares  of  the  $1,000,000  capital  stock  they  were 
authorized  to  issue.  They  offer  one  thousand 
shares  for  sale,  which  are  bought  in  small  quan- 
tities by  a  score  of  buyers.  If  the  business  has 


122        A  Primer  of  Political  Economy 

a  good  outlook  the  shares  will  sell  above  par,  or 
bring  more  than  $100,000  to  the  business.  The 
buyers  of  this  new  stock  are  entitled  to  vote,  in 
proportion  to  their  holdings,  at  the  election  of 
directors,  and  to  have  their  percentage  of  the 
dividends  declared  from  the  returns  of  the  en- 
terprise. 

One  advantage  of  the  joint  stock  method  of 
partnership  is  ease  of  transfer.  A  man  whose 
capital  is  invested  in  a  shoe  factory  in  the  morn- 
ing, may  sell  his  shares  and  buy  others  in  a 
sugar  refinery  by  noon.  Before  evening  he 
may  sell  these  shares  and  invest  in  a  railway,  a 
bank,  a  stove-foundry,  a  land  company,  a  coal 
mine  or  any  other  enterprise.  At  the  stock 
exchanges,  shares  in  various  enterprises  as  well 
as  bonds  and  debentures  of  many  kinds  are 
continually  changing  hands,  so  that  a  man  can 
transfer  his  capital  from  one  enterprise  to  an- 
other many  times  in  a  day.  John  Doe  may 
have  held  stock  in  the  factory  in  which  the 


Interest — Joint  Stock  Companies  —  Trusts     123 

boots  he  bought  were  made.  Through  this 
method  of  combining  capital,  great  trusts  are 
organized.  Men  unite  their  capital  and  buy 
up  the  stock  of  many  shoe  factories.  They 
strive  by  the  cooperation  of  present  stock- 
holders, to  bring  all  the  factories  of  the  country 
under  a  single  board  of  directors.  Such  com- 
binations lessen  the  cost  of  management,  man- 
ufacture, and  distribution,  but  under  some 
conditions  enable  owners  to  inordinately  ad- 
vance prices  to  the  consumers. 

The  interest  or  dividend  which  capital  pro- 
duces has  been  called  the  reward  of  absti- 
nence, not  that  the  stock-holder  lives  frugally, 
but  because  he  refrains  from  consuming  his 
capital  and  gives  others  the  use  of  it.  We  have 
seen  how  abstinence  or  self-denial  is  necessary 
to  bring  capital  into  existence,  and  the  same 
conduct  is  also  necessary  to  keep  it  in  existence. 
If  John  Doe  had  decided  to  buy  a  hat  instead 
of  a  pair  of  boots,  he  would  have  lessened  the 


124        A  Primer  of  Political  Economy 

demand  for  boots  and  increased  the  demand  for 
hats.  Somewhere  in  the  great  world  of  indus- 
try, labor  would  have  been  turned  from  the 
making  of  boots  to  the  making  of  hats,  although 
it  might  be  as  imperceptible  as  the  impact  of  a 
pebble,  thrown  in  the  ocean,  on  the  farthest 
shore.  In  the  same  way  if  a  man  ceases  to 
abstain,  and  consumes  his  wealth  in  various 
forms  of  indulgence,  labor  is  somewhere  turned 
from  the  production  of  permanent  capital  to  the 
production  of  things  for  immediate  use.  If  he 
holds  stock  in  a  shoe  factory  he  cannot  eat  the 
stock  or  amuse  himself  with  the  machinery.  If 
he  ceases  to  abstain,  he  sells  his  stock,  and  the 
factory  goes  on  as  before.  With  the  proceeds 
of  the  sale  he  buys  costly  viands  and  rich  ap- 
parel, has  a  splendid  mansion,  a  yacht,  and  a 
special  car  built  for  his  own  use,  and  indulges 
in  costly  luxuries  till  all  is  spent.  He  has 
turned  labor  from  the  production  of  capital  to 
the  production  of  things  for  his  personal  indul- 


Interest — Joint  Stock  Companies — Trusts    125 

gence.  Less  capital  has  been  available,  in  con- 
sequence, to  increase  the  productiveness  of 
labor.  The  public  have  lost  to  that  extent,  a 
loss  that  must  be  felt  somewhere  in  the  indus- 
trial world,  and  he  has  deprived  himself  of  the 
dividends  or  interest  he  might  have  obtained 
as  the  reward  of  abstinence. 

Although  rich  men  are  abundant  and  for- 
tunes are  growing,  the  amount  of  real  capital 
available  at  any  time  is  never  large.  The 
bondholder  can  start  a  shoe  factory,  but  that 
does  not  prove  that  bonds  are  wealth  or  capi- 
tal. Bonds  issued  by  the  government  are  an 
evidence  of  the  debt  of  the  whole  people  to  a 
few  people,  and  could  be  destroyed  without 
lessening  the  wealth  of  the  community.  Bonds 
of  a  railway  or  other  corporation  are  records 
of  its  debt.  Paper  money,  too,  is  an  evidence  of 
debt,  and  could  be  destroyed  without  lessen- 
ing the  total  wealth  of  the  people.  The  value 
of  land,  so  far  as  it  is  due  to  the  growth  of 


126        A  Primer  of  Political  Economy 

population  and  not  to  inherent  productiveness, 
is  an  indication  that  the  people  are  poor  in  land. 
The  land  titles  that  go  to  make  up  so  many  large 
fortunes  could  all  be  revoked  without  lessen- 
ing the  wealth  of  the  whole  people.  A  small 
amount  of  actual  wealth  is  made  the  basis  of 
many  large  fortunes,  which  consist  really  of 
the  debts  of  the  whole  people.  The  real 
capital  in  the  world  is  never  great.  It  is 
nature's  law  that  the  world  must  live,  as  it  is 
described  in  current  phrase,  "from  hand  to 
mouth. "  Every  extensive  destruction  or  waste 
of  capital  is  felt  in  its  injurious  effect  on  trade 
and  industry. 


CHAPTER  XVI 

GOVERNMENTAL    INTERFERENCE 

IT  is  natural  that  the  men  who  compose 
governments  and  exercise  authority  should  re- 
gard themselves  better  able  to  decide  as  to  the 
advisability  of  various  lines  of  industry  than 
the  people  actually  engaged  in  them.  Left 
to  themselves,  the  people  adopt  that  which 
seems  to  them  the  easiest  method  of  accom- 
plishing their  aims.  If  they  want  stoves,  and 
find  it  easier  to  grow  wheat  and  give  it  in 
exchange  than  to  make  the  stoves  themselves, 
they  will  adopt  the  easier  method.  If  they 
can  get  wheat  and  beef  easier  by  weaving 
cloth  or  making  stoves,  than  by  sowing  grain 
and  raising  cattle,  they  will  adhere  to  weaving 
and  stove  making.  The  pressure  of  supply 
127 


128        A  Primer  of  Political  Economy 

and  demand  crowds  out  the  more  costly  pro- 
cesses. But  governments  are  often  convinced 
that  better  methods  are  possible. 

If  the  maker  of  John  Doe's  boots  imported 
the  leather,  that  is,  bought  it  from  some  one  in 
England  or  elsewhere,  it  would  mean  that  the 
people  here  found  it  more  profitable  to  make 
something  else  and  give  it  in  exchange  for 
the  leather  than  to  make  the  leather  them- 
selves. That  leather  would  be  paid  for  with 
John  Doe's  wheat.  The  shoe  manufacturer 
would  not  send  money  across  to  England 
when  buying  leather  there.  The  currier  in 
England,  when  selling,  would  draw  a  bill  of 
exchange  on  the  American  manufacturer  and 
sell  it  to  an  English  banker.  It  would  be  sent 
across  to  an  American  bank  to  which  the 
American  manufacturer  would  make  his  pay- 
ment. The  English  buyer  of  John  Doe's 
wheat  would  hot  forward  money  across  to  the 
United  States.  The  grain  dealer  would  draw 


Governmental  Interference  129 

a  bill  of  exchange  on  him  and  sell  it  to  an 
American  bank.  That  would  be  mailed  to  an 
English  banker  who  would  demand  payment 
from  the  wheat  buyer.  Thus  the  local  bank 
would  pay  for  John  Doe's  wheat,  but  would 
be  remunerated  by  the  money  of  the  leather 
buyer,  and  the  English  banking  house  would 
pay  for  the  leather  and  be  recouped  by  receiv- 
ing the  money  for  John  Doe's  wheat.  Both 
transactions,  though  entirely  independent  in 
themselves,  would  be  settled  between  the  banks 
in  a  clearing  house,  without  the  shipment  of 
money.  In  reality  the  leather  would  be  paid 
for  with  the  wheat. 

If  the  government  decide  that  it  would  be 
profitable  for  the  people  to  tan  and  curry  their 
own  leather  it  interferes  in  the  matter.  No 
man  would  undertake  the  business,  because  he 
would  lose  his  capital.  He  must  sell  his  prod- 
uct at  the  same  price  as  foreign  leather,  and 
it  might  cost  more  than  that  to  manufacture  it. 


130        A  Primer  of  Political  Economy 

The  Government  agrees  to  give  any  one  tanning 
and  currying  leather,  a  subsidy  sufficient  to 
make  good  the  loss  and  yield  interest  on  the 
capital  invested.  Men  become  more  willing 
at  once  to  engage  in  the  work,  and  a  new 
industry  is  established.  The  subsidy  is  taken 
from  other  people  and  from  other  industries, 
so  the  creation  of  industries  in  that  way  must 
be  limited  by  the  ability  of  the  people  to  bear 
the  increased  burden. 

Subsidies  are  sometimes  given  for  the  min- 
ing of  minerals,  when  they  exist  in  such  a 
form  that  it  will  not  pay  to  take  them  from 
the  ground.  They  are  given  occasionally  for 
later  processes  such- as  the  smelting  of  ore  or 
the  rolling  of  metal  into  bars,  when  the  pro- 
ceeds of  such  industries,  unaided,  would  not 
equal  their  cost.  Such  help  is  sometimes 
given  to  promote  methods  of  disposal  which 
would  otherwise  be  unprofitable  and  conse- 
quently abandoned.  Exportation  is  the 


Governmental  Interference  131 

method  generally  assisted.  Germany,  France, 
and  Austria  have  given  large  sums  of  money, 
from  year  to  year,  to  the  men  who  have  exported 
sugar.  These  subsidies  have  made  serious 
additions  to  the  people's  burden  of  taxation. 
The  sugar  was  sold  chiefly  in  England,  so 
cheap  that  it  did  not  pay  the  cost  of  manu- 
facture and  transportation,  but  the  loss  was 
made  good  to  the  exporters  by  the  subsidies. 
Sometimes  the  Government  furnishes  seed  to 
farmers,  at  public  expense,  to  induce  them  to 
change  their  crops  or  methods,  or  supplies 
live  stock,  or  the  material  for  various  indus- 
tries. 

Another  method  of  aiding  industries  is  by 
a  protective  tariff.  Instead  of  giving  the  tan- 
ner and  currier  direct  subsidies  to  make  good 
their  loss,  a  tariff  is  imposed  on  imported 
leather.  This  enables  the  makers  of  leather 
to  charge  the  shoe  manufacturer  a  price  suffi- 
cient to  make  the  business  profitable.  The 


132        A  Primer  of  Political  Economy 

shoe  manufacturer  could  not  charge  the  in- 
creased cost  to  the  merchant  without  the  pro- 
tection of  an  import  tariff  on  boots  and 
shoes.  This  also  is  imposed,  and  John  Doe 
instead  of  paying  taxes  for  a  direct  subsidy 
to  the  leather  maker  pays  it  in  the  higher 
price  of  his  boots.  This  is  referred  to  in  a 
previous  chapter  on  taxation. 

An  import  tariff  on  pig-iron  enables  the 
smelter  to  charge  a  price  sufficient  to  make 
his  work  profitable.  The  tariff  on  bar-iron 
enables  the  owners  of  rolling  mills  to  recoup 
themselves  for  this  higher  price.  The  tariff 
on  machinery  enables  the  foundry-men  and 
machinists  to  recoup  themselves  for  the 
higher  prices  of  bar-  and  pig-iron.  The  shoe 
manufacturer  who  buys  machinery  at  the  ad- 
vanced price,  is  compensated  by  the  higher 
price  obtainable  through  the  tariff  on  boots, 
and  John  Doe  makes  his  contribution  when 
buying  a  pair.  The  aiding  of  one  industry 


Governmental  Interference  133 

necessitates  the  compensatory  aiding  of  many. 
In  Britain  they  have  abandoned  all  such  aids, 
the  Government  proceeding  on  the  assump- 
tion that  the  people  actively  engaged  in  the 
numerous  methods  of  producing  wealth  are 
best  able  to  decide  what  is  profitable  and 
should  be  continued,  and  what  is  unprofitable 
and  should  be  abandoned. 


CHAPTER  XVII 

SCHEMES   FOR   BETTERMENT 

THE  British  Government  abandoned  inter- 
ference with  the  production  of  wealth,  chiefly 
on  account  of  its  influence  on  distribution. 
The  corn  laws,  a  tariff  on  imported  grain, 
enabled  the  farmer  to  charge  excessive  prices 
for  food  supplies.  It  was  argued  that  the 
farmers  who  sold  food  and  hired  labor  had 
all  the  advantage,  and  that  the  workmen 
who  sold  their  labor  and  bought  food  had  no 
protection.  The  same  argument  is  still  ad- 
vanced against  the  protection  policy  —  that  it 
gives  no  compensation  to  workmen,  who  must 
buy  the  taxed  articles  and  sell  their  labor  in 
open  competition.  The  British  people  suf- 
fered from  low  wages  and  dear  goods,  till 


Schemes  for  Betterment  135 

there  was  widespread  distress.  It  was  thought 
that  perfect  freedom  to  manufacture  and  ex- 
change, to  buy  and  sell,  to  work  at  any  em- 
ployment and  to  make  the  best  bargain 
possible  on  all  occasions,  free  from  a  restric- 
tive tariff,  would  enable  every  man  to  get  the 
exact  value  of  the  service  he  rendered  the 
community.  It  was  complained  that  the  men 
who  worked  hardest  and  produced  most,  were 
not  the  richest,  but  generally  the  poorest,  and 
to  remedy  that,  all  the  laws  obstructing  trade 
or  industry  —  all  laws  helping  one  method  of 
wealth  production  at  the  expense  of  another 
were  abolished. 

We  have  seen  how,  when  labor  is  aided  by 
capital,  the  product  is  shared  between  the 
worker  and  the  owner  of  the  capital.  The 
reward  of  the  laborer  is  called  wages,  whether 
he  works  for  a  stipulated  wage  or  employs 
himself  at  some  primary  occupation,  such  as 
fishing  or  gathering  wild  fruit.  The  reward 


136        A  Primer  of  Political  Economy 

of  the  owner  of  capital  is  called  interest, 
whether  he  loans  it  at  a  stated  rate  per  cent, 
or  employs  workmen  to  operate  his  machinery 
while  he  sells  the  products  of  their  labor.  A 
workman  may  use  his  own  machinery  and 
capital,  as  in  the  case  of  a  blacksmith  with 
his  own  forge  and  anvil,  a  fisherman  with  his 
own  boats  or  nets,  or  a  shoemaker  with  his 
own  tools  and  material.  In  such  cases  the 
returns  received  would  be  part  wages  and 
part  interest,  but  the  distinction  between 
them  should  be  clearly  maintained.  Another 
element  to  be  considered  in  the  problem  of 
distribution  of  wealth  is  rent,  which,  in  its 
economic  sense  means  the  return  which  goes 
to  the  owner  of  the  land.  Land  is  a  term 
used  to  imply,  not  merely  the  soil  of  the 
farm  and  the  area  of  the  city  lot,  but  miner- 
als, forests,  water  and  all  nature's  material 
gifts  to  man.  It  is  man's  most  enduring 
possession,  though  its  value  may  fluctuate  or 


Schemes  for  Betterment  137 

entirely  disappear  by  the  movement  of  popu- 
lation or  other  influences.  The  machinery 
used  in  the  shoe  factory  was  taken  from  the 
land  by  human  labor,  and  by  the  processes 
of  nature  will  return  to  the  land  again. 
There  is  consequently  a  difference  between 
owning  the  machinery  and  owning  the  land. 
A  barrel  of  water  taken  from  the  lake  and 
carried  to  where  it  is  wanted  becomes  valu- 
able. Labor  has  been  profitably  expended  on 
it.  But  by  the  laws  of  nature  that  water  will 
return  to  the  lake  again.  That  exemplifies 
the  difference  between  owning  the  barrel  of 
water  and  owning  the  lake,  which  is  land  in 
an  economic  sense.  The  food  and  clothing, 
the  houses,  the  machinery,  all  the  wealth  with 
which  we  are  surrounded  has  been  taken 
from  the  land  by  human  labor  and  must  re- 
turn to  the  land  again.  The  portion  of  the 
products  of  labor  which  goes  to  the  owner  of 
the  land  is  called  rent,  and  in  large  cities 


138        A  Primer  of  Political  Economy 

where  there  are  great  opportunities  for  trade, 
land  becomes  very  valuable  through  rent  being 
extremely  high.  The  yearly  value  of  a  location 
for  a  store  is  estimated  in  rent,  and  that  deter- 
mines the  value  of  the  site.  As  cities  increase 
in  size  the  returns  to  the  landowners  become 
proportionately  large.  The  principle  of  land 
valuation  is  explained  in  Chapter  VIII. 

The  abandonment  of  governmental  inter- 
ference with  trade  and  manufacture  in  Britain 
did  not  bring  about  all  the  good  results  ex- 
pected. Although  workers  were  trying  to  sell 
their  labor  to  the  best  advantage,  men,  women, 
and  children  were  obliged  to  work  unreason- 
ably hard  in  factories  and  workshops  for  a 
meagre  living,  and  the  increased  productive 
power  of  their  labor  through  the  use  of  machin- 
ery did  not  make  much  improvement  in  their 
condition. 

The  failure  of  machinery  and  the  combi- 
nation of  working  forces  to  bring  plenty  to 


Schemes  for  Betterment  1 39 

all,  has  been  attributed  to  the  increase  of  pop- 
ulation beyond  the  capacity  of  the  country 
to  sustain  it,  but  the  defect  is  quite  as  marked 
in  new  and  unsettled  countries  as  where  popu- 
lation is  dense.  Distress  prevails  because  there 
seem  to  be  too  many  hands  ready  to  do  all  the 
work  necessary  for  human  maintenance  and 
comfort.  Disappointing  results  have  led  to  two 
attacks  on  the  existing  organization  of  indus- 
trial society,  from  diametrically  opposite  stand- 
points. The  Socialists  declare  that  freedom 
of  contract,  as  exemplified  in  Britain,  has  not 
given  every  man  a  proper  return  for  the  ser- 
vice he  renders,  nor  even  a  near  approach  to  it 
—  that  abundant  luxuries  are  enjoyed  by  those 
who  do  nothing  to  create  them  and  render  no 
service  to  others,  while  those  who  work  hard 
and  produce  wealth  have  but  a  scanty  living. 
As  a  remedy  they  would  abolish  freedom  of 
contract,  and  turn  over  all  this  complicated 
mechanism  of  production  and  distribution  to 


140        A  Primer  of  Political  Economy 

the  supervision  of  the  governments  of  various 
nations.  They  would  impose  on  the  authori- 
ties the  duty  of  seeing  that  each  rendered  his 
share  of  useful  service  and  received  his  share 
of  the  necessaries  and  luxuries  of  life.  They 
make  an  appeal  to  the  higher  nature  of  man, 
and  claim  that  each  should  work,  not  for 
his  personal  advantage,  but  for  the  good  of  his 
fellow-men.  They  say  that  the  command  to 
man  to  love  his  neighbor  as  himself,  should  be 
carried  into  every  walk  of  life.  As  a  first  step 
toward  their  proposed  change  they  seek  to  turn 
the  railways  and  machinery  of  transportation 
over  to  the  national  governments,  and  the 
water,  gas,  and  street-car  services  over  to  the 
municipal  governments. 

The  Individualists  also  admit  the  failure  of 
the  existing  system  to  give  each  an  adequate 
return  for  his  services,  but  claim  that  it  is  not 
due  to  freedom  of  contract  but  to  the  absence 
of  that  condition.  They  say  that  workmen  sell 


Schemes  for  Betterment  141 

their  labor  for  far  less  than  its  actual  produc- 
tive power  because  they  do  not  enjoy  freedom 
of  contract.  They  claim  that  labor  is  sold 
under  stress  or  duress,  because  workers  are 
denied  the  right  to  employ  themselves,  that  the 
sale  of  labor  is  not  a  free  contract  unless  all 
have  an  equal  right  of  access  to  the  earth's 
surface,  that  is,  an  equal  right  to  what  econo- 
mists call  land.  It  is  their  contention  that  past 
generations  had  no  right  to  parcel  the  land 
among  themselves,  as  it  is  the  heritage  of  the 
whole  human  race  —  that  a  man  denied  his 
equal  share  in  this  heritage  must  sell  his  labor, 
not  in  a  free  contract,  but  at  a  great  disadvan- 
tage. He  cannot  employ  himself,  and  must 
accept  whatever  somebody  else  is  willing  to 
give  him.  Freedom  to  trade  as  in  Britain  is 
but  a  short  step  toward  freedom  of  contract, 
and  the  right  of  self  employment  by  access  to 
land  is  an  essential  not  yet  secured.  It  is 
claimed  that  the  apparent  overcrowding  of 


142        A  Primer  of  Political  Economy 

population  is  due  to  the  fact  that  the  present 
system  induces  men  to  obtain  land  before  they 
want  to  use  it,  and  to  hold  it  till  the  pressure  of 
population  increases  its  value.  Those  Individ- 
ualists who  confine  their  attention  to  agricul- 
tural land  would  throw  it  open  to  the  public, 
under  such  regulations  as  would  secure  to  each 
worker  the  product  of  his  labor,  and  prevent 
any  one  from  holding  a  greater  area  than  he 
could  profitably  use.  Those  who  wish  to  restore 
urban  as  well  as  rural  land  to  the  people  would 
leave  existing  titles  untouched,  but  would  turn 
over  the  rental  value  of  all  land  to  the  Govern- 
ment in  lieu  of  all  other  taxation.  This,  they 
claim,  would  put  the  whole  people  in  the  posi- 
tion of  the  landlord,  or  collector  of  economic 
rent,  would  remove  the  chances  of  gain  which 
now  induce  men  to  take  land  and  hold  it  at  a 
high  price  before  they  want  to  use  it,  and 
would  leave  unused  land  free  and  open  to  the 
unemployed.  The  practical  efforts  of  this  cult 


Schemes  for  Betterment  143 

take  form  in  the  gradual  shifting  of  taxation 
from  trade  and  the  products  of  industry  to  land 
according  to  its  value.  While  the  Socialists 
attribute  existing  evils  to  free  bargaining  in  the 
sale  of  labor  and  its  products,  the  Individualists 
attribute  them  to  the  absence  of  such  freedom 
in  bargaining.  Whatever  system  may  be  in 
vogue  we  must  live  by  labor,  by  satisfying  each 
other's  wants,  and  the  wealth  which  our  labor 
takes  from  the  land  must  return  to  it  again 
after  having  served  our  purpose. 


INDEX1 


Abstinence,  necessary  to  bring 
capital  into  existence  and  to 
preserve  it,  123;  rewarded 
by  interest,  123. 

Alloys  used  to  harden  coins,  71. 

Altruism  (Engels,  "  Social- 
ism, Utopian  and  Scien- 
tific"; Lawrence  Gronlund, 
"  The  Cooperative  Common- 
wealth"), 140. 

Anticipating  changes  in  de- 
mand, 48. 

Bank  notes  (see  Money)  I,  72; 
sustained  by  confidence,  78; 
issued  in  excess  of  gold  held 
to  redeem  them,  97;  Bank  of 
England  notes,  95;  Bank 
notes  in  Scotland  and  Ire- 
land, 96. 

Banks,  inspection  sustains  con- 
fidence in,  78;  minimum  capi- 
tal, 78;  advantages  of  note 
issues,  80 ;  facilitate  lending, 
118. 

Bills  of  exchange,  128. 


Bleaching  Powder   (Making), 

Chap.  IV.,  22. 
Bonds,    national,    72,    83;    as 

security,  84;  not  wealth,  125. 
Borrowing  money  is  borrowing 

capital,  119. 
Breakfast  table,  supplied  from 

every  quarter  of  the  globe, 

xi. 
British  Currency,  Chap.  XII.,  95. 

Canadian  currency  system,  73, 
74;  bank  notes,  74;  Govern- 
ment notes  redeemable,  75, 

76. 

Capital,  saved  results  of  labor, 
103;  permits  specializing, 
104;  in  tools  and  material, 
105;  sustains  industry  till 
products  are  available,  1 08; 
appearing  as  the  debts  of 
others,  109;  must  be  tangible, 
no;  limited  in  extent,  125. 

Capitalist  (The),  Chap.  XIV., 
109;  in  a  position  to  make 
advances,  115. 


1  Authorities  referred  to  are  not  mentioned  in  the  text,  but 
should  be  consulted  on  the  subjects  with  which  their  names  are 
connected. 

145 


146 


Index 


Capitalistic  production,  109. 

Clearing  House  balances,  129. 

Coinage  of  precious  metals,  71 ; 
quantities,  weight,  and  fine- 
ness, 71;  saves  people  the 
trouble  of  weighing,  87. 

Coins,  2,  73;  coins  equal  in 
denomination  to  notes,  75; 
parity  of  gold  and  silver,  87 ; 
coinage  ratio,  89;  weights, 
89;  weights  changed,  90; 
irregular,  96;  facilities  neces- 
sary, 98;  British  standard, 
98;  small  charge  for  the  ser- 
vice, 98. 

Coins  and  Currency,  Chap.  X., 

72- 
Commerce,  its  intricate  nature, 

xiv;  is  barter,  129. 
Competition  regulates  rewards, 

100. 
Confusion  in  official  guidance, 

vi. 
Cooperation,   unconscious,  42, 

50;  in  a  factory,  107,  109. 
Corn  Laws,  British  (Augustus 

Mongredin,  "  History  of  the 

Free    Trade    Movement    in 

England")*  134- 
Credits  must  be  realized  to  be 
used  as  capital,  in. 

Debts,  bonds,  evidences  of 
(Adams,  "Public  Debts"), 
83;  obligations  to  deliver 


coin,  98;  the  savings  of  a 
worker,  107;  debts  of  oth- 
ers are  not  capital,  109. 

Dependence,  mutual,  in  pro- 
ductive work  (Adam  Smith, 
"  Wealth  of  Nations  "),  42. 

Desires  satisfied  with  least  ex- 
ertion, 45,  49,  50. 

Distribution  as  essential  as 
production,  99;  complicated, 
101. 

Dividends,  120. 

Division  of  labor,  increased  re- 
sults, 40. 

Division  of  labor  (Adam  Smith, 
"Wealth  of  Nations"),  66. 

Dollar,  2;  its  meaning,  74;  its 
weight,  74. 

Economics,   a    knowledge    of, 

essential  to  citizenship,  vii. 
Education  at  public  expense, 

vii. 
Electors  the  supreme  authority, 

vi. 
Esquimaux,  primitive  methods, 

103. 
Exertion,  satisfy  desires  with  the 

least    (Ricardo,   "Principles 

of  Political  Economy  "),  45. 
Exports  paid  for  with  imports, 

128. 

Fifty  workers  directly  employed 
to  make  a  boot,  41. 


Index 


147 


Fortunes,  the  debts  of  the 
whole  people,  126. 

Fractional  coins,  72,  81,  94. 

Free  trade  (R.  T.  Ely,  "  Prob- 
lems of  To-day"),  63. 

Gathering  India  Rubber,  Chap. 
VI,  27. 

Gauchos  (herdsmen)  help  to 
make  boots,  7. 

Gold,  used  uncoined  as  money, 
71;  currency,  83. 

Government  Interference  (Her- 
bert Spencer,"  Social  Statics," 
edition  of  1873  and  recent 
essays ;  Thomas  Hobbes, 
"Elements  of  Law,  Natural 
and  Politic,"  Arnold  Toyn- 
bee,  "  Industrial  Revolution 
of  Eighteenth  Century"), 
Chap.  XVI.,  127. 

Greenbacks,  73. 

Gresham's  law,  that  coins  of 
less  value  drive  coins  of 
greater  value  out  of  circula- 
tion, 88. 

Herdsman  of  the  Plains  (The) 

Chap.  I.,  I. 
How  Oil   is   Obtained,   Chap. 

II.,  8. 

Imports  paid  for  with  exports, 

128. 
In  the  Heart   of  a  Mountain, 

Chap.  III.,  15. 


Indians,  their  money,  69;  pro- 
duced capital,  105. 

Individualism  (Henry  George, 
"  Protection  or  Free  Trade  "), 
140. 

Industry  specialized,  103. 

Interest,  payment  for  the  use  of 
capital,  1 06;  increase  in  the 
product  of  labor  through  the 
specializing  of  industry,  112, 
116;  percentage  for  the  loan 
of  capital,  117;  borrowing 
money  is  borrowing  capital, 
118;  reward  of  abstinence 
(W.  N.  Senior,  "Principles 
of  Political  Economy"),  123; 
reward  of  capital,  136. 

Interest  —  Joint  Stock  Compa- 
nies—Trusts, Chap.  XV., 
116. 

John  must  pay  for  the  Boots, 

Chap.  IX,  64. 
Joint   stock    companies,    119; 

easy  transfer   of  ownership, 

122. 

Labor  adds  value  to  material, 
104  ;  makes  an  advance  to 
the  capitalist,  iii. 

Land,  source  of  all  wealth, 
(Henry  George,  "Progress 
and  Poverty  "),  43  ;  its  value 
not  wealth,  126;  all  wealth 
must  return  to  it,  137. 

Law   of  Supply  and  Demand 


148 


Index 


(John  Stuart  Mill,  "Princi- 
ples of  Political  Economy  "), 
Chap.  VII.,  42. 

Legal  tender  (W.  Stanley 
Jevons,  "The  Mechanism  of 
Exchange"),  76;  legal  tender 
laws  do  not  give  value  to 
notes  but  coerce  creditors, 

76. 

Lending  money  and  credit,  1 18. 

Making  Bleaching  Powder, 
Chap.  IV.,  22. 

Marginal  utility  (Bohm-Ba- 
werk  "  Positive  Theory  of 
Capital "  ;  Smart,  "  Intro- 
duction to  the  Theory  of 
Value  "),  46. 

Merchant  renders  useful  service, 
100. 

Miners  help  to  make  boots,  21. 

Money,  of  material  that  every 
one  wants  (W.  Stanley 
Jevons  "The  Mechanism  of 
Exchange"),  68;  Wampum, 

69. 

Mutual  dependence  in  wealth 
production,  42. 

National  Bank,  organization,  84. 

National  Bank  notes,  72; 
notes  equal  in  denomination 
to  coins,  75;  redeemable, 
85;  accepted  by  Govern- 
ment, 86. 


National  Banks,  Gold  and 
Silver,  Chap.  XI.,  83. 

Paper  currency,  willingness 
and  ability  to  redeem  it  gives 
it  value,  76;  its  nature,  77; 
sustained  by  confidence,  77  ; 
not  wealth,  125. 

Paying  All  the  Workers,  Chap. 
XIII.,  102  ;  through  the  use 
of  capital,  113. 

Paying  all  who  helped  to  make 
the  boots,  65. 

Population  increasing  faster 
than  sustenance  (T.  R.  Mal- 
thus,  "An  Essay  on  the 
Principles  of  Population  "  ; 
Bonar,  "Malthus  and  his 

Work"),  139. 

Primitive  conditions,  65,  103. 
Production  of  wealth  infinitely 

complicated,  114. 
Products  of  labor  increased  by 

specializing,  66. 
Profits,  reward  for   service  in 

distribution,  99. 
Protective     tariff       (R.     Ellis 

Thompson,   "  Protection     to 

Home     Industry  "  ;   Bastiat, 

"Sophisms  of  Protection"), 

63. 

Ratio  of  gold  and  silver,  88. 
Redeemable  paper  currency,  76. 
Rent,  reward  of  the  landowner, 

136- 


Index 


149 


Rubber  gatherer  helps  to  make 
boots,  32. 

Satisfying  desires  with  the  least 
exertion,  45,  49,  50,  127. 

Satisfying  each  other's  wants, 
xiii,  I,  32. 

Saving,  means  getting  others 
in  debt,  107. 

Service  rendered  brings  varied 
returns,  xiii. 

Silver,  2  ;  silver  certificates,  72, 
86,  92,  93;  silver  fractional 
coin,  72,  82  ;  silver  dollar,  73 ; 
as  currency,  83 ;  free  coinage 
abolished  in  1873,  91;  aiding 
miners,  91,  92  ;  not  coined 
on  private  account,  99. 

Sixteen  to  one,  87,  88,  89. 

Smelting  ore,  19. 

Socialism  (Karl  Marx,  "  Capi- 
tal"), 139. 

Sovereign  (British  coin),  95. 

Specializing  industry,  103; 
increases  products,  107,  in. 

Standard  of  value,  97,  98. 

Subsidies,    130;    to   exporters, 

I3L 

Supply  and  Demand  (The  Law 
of),  Chap.  VII.,  42,  47,  48. 

Supplies,  drawn  from  all 
sources,  xi. 

Taxation,  Chap.  VIII.,  51. 
Taxation   (necessity   for),  52 ; 


manifold,  53;  on  land,  53  ; 
which  cheapens  and  makes 
dear,  54,  55  ;  which  cannot 
be  shifted  (John  Stuart  Mill, 
"  Principles  of  Political  Econ- 
omy"), 55  ;  paid  by  those 
who  levy  it,  58,  59  ;  state 
and  provincial,  59;  national, 
60;  compels  the  purchase 
of  home  products,  62  ;  pro- 
tection (Thompson, "  Protec- 
tion to  Home  Industry"), 
63 ;  free  trade  (Bastiat, 
"  Sophisms  of  Protection  ") , 
63;  shiftable  (D.  A.  Wells, 
"Who  pays  your  Taxes  ?"),  5  2. 

Token  coins,  72,  81,  94,  97. 

Tools  are  capital,  105. 

Trade,  a  part  of  the  division  of 
labor,  67;  is  barter,  128. 

Treasury  notes,  73,  92,  93. 

Trusts,  123. 

Unconcious  cooperation,  42,  50. 

Value,  must  constantly  change, 
87;  ratio  of  gold  and  silver, 
88  ;  standard  of  value,  97  ; 
augmented  by  labor,  104. 

Wages  for  service,  109;  reward 

of  labor,  135. 
Wealth,  its  short  duration,  44  ; 

small  in  the  aggregate,  126. 
Whalers  help  to  make  boots,  14. 
Wampum,  primitive  money,  69. 


THE  AMERICAN  COMMONWEALTH, 

BY  THE 

Right  Hon.  JAMES  BRYCE,  D.C.L., 

Author  of  "  The  Holy  Roman  Empire  "  ;  MJ*.for  Aberdeen. 

THIRD  EDITION.    REVISED  THROUGHOUT.    IN  Two  VOLUMES. 

Large  12010,  $4.00,  net. 


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"  Every  man  or  woman  who  aspires  to  good  citizenship 
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